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Permian Resources Announces Fourth Quarter 2022 Results and Provides Improved 2023 Guidance

Permian Resources Corporation (“Permian Resources” or the “Company”) (NYSE: PR) today announced its fourth quarter and full year 2022 financial and operational results and 2023 operational plans.

Recent Financial and Operational Highlights

  • Delivered fourth quarter oil production of 81.4 MBbls/d, exceeding the mid-point of prior outlook by 9%
  • Reported net cash provided by operating activities of $528 million and adjusted free cash flow1 of $256 million
  • Executed a series of portfolio optimization transactions, adding high-return inventory and generating ~$100 million of net cash proceeds
  • Enhanced capital efficiency driven by strong well performance and cost control
  • Delivered controllable cash costs of $7.89 per Boe
  • Announced quarterly base dividend of $0.05 per share

2023 Financial and Operational Plan

  • Increased 2023 oil and total production guidance by 4% and 3%, respectively, compared to previous outlook
    • Continue to target oil production growth of ~10% in the fourth quarter 2023 compared to the prior year period, despite exceeding fourth quarter 2022 production outlook
  • Currently operating seven rigs, with plans to reduce to six rigs during second quarter 2023 as a result of operational synergies
  • Reduced controllable cash costs by ~5% to $7.60 per Boe compared to previous outlook
  • Announced 2023 total capital budget of $1.25 to $1.45 billion
    • Increase to prior outlook driven primarily by higher working interest (85% from 80% previously) and longer lateral lengths (9,300’ from 9,000’ previously)
  • Variable return to be initiated based upon first quarter 2023 results

Management Commentary

“Permian Resources’ outstanding fourth quarter results reflect a continuation of our strong operational track record,” said Will Hickey, Co-CEO of Permian Resources. “In our first full quarter post-merger, our team delivered strong financial and operational results driven by well outperformance and continued cost discipline.”

“Our team has worked diligently to build an optimized 2023 plan that maximizes capital efficiency and leads to higher oil production and lower cash costs, accomplishing our ultimate goal of driving more free cash flow and higher returns for our investors,” said James Walter, Co-CEO of the Company. “We believe Permian Resources represents a unique value proposition for investors, with the benefits of scaled operations in the Delaware Basin combined with a nimble and creative approach to value creation, as exemplified by our recent portfolio optimization efforts.”

Financial Results

For the quarter, Permian Resources generated net cash provided by operating activities of $528 million and adjusted free cash flow of $256 million. The Company also reported net income attributable to Class A Common Stock during the fourth quarter of $83 million, or $0.26 per diluted share.

Average daily crude oil production for the fourth quarter was 81,378 barrels of oil per day (“Bbls/d”), and total production during the quarter averaged 158,208 barrels of oil equivalent per day (“Boe/d”).

Permian Resources maintains a strong financial position and low leverage profile. At December 31, 2022, the Company had approximately $60 million in cash on hand and $385 million of borrowings outstanding under its revolving credit facility. Net debt-to-LQA EBITDAX1 at December 31, 2022 was approximately 0.9x, and the Company has no debt maturities until 2026.

Operational Results

Permian Resources continues to optimize its Delaware Basin acreage position through large-scale, co-development well packages. The Company significantly exceeded its fourth quarter production targets, while maintaining cost discipline. Permian Resources’ robust production results during the quarter were primarily attributable to better than expected well performance, in addition to higher production runtime and reduced cycle times. Total capital expenditures incurred for the quarter were $325 million.

2023 Operational Plans and Targets

Based on recent operational results, Permian Resources increased its 2023 oil production target by 4% to approximately 85 MBbls/d and raised its total production target by 3% to approximately 162 MBoe/d, based on the mid-point of guidance. Permian Resources also lowered its full year 2023 guidance range for controllable cash costs (LOE, Cash G&A and GP&T) on a per unit basis by approximately 5%, compared to its preliminary full year outlook.

The estimated fiscal year 2023 total capital budget is approximately $1.25 billion to $1.45 billion. Permian Resources expects to turn-in-line (“TIL”) approximately 150 gross wells, with an average working interest of approximately 85% and 8/8ths net revenue interest of approximately 78%. This represents an increase from its previously expected full year working interest of 80%. The Company also expects its average completed lateral length during 2023 to increase to approximately 9,300 feet, compared to 9,000 feet previously.

Due to recent efficiency gains, Permian Resources expects to further reduce its operated rig program from seven currently to six during the second quarter. Assuming planned activity levels, the Company is maintaining crude oil production growth of approximately 10% in the fourth quarter 2023 compared to the fourth quarter 2022.

“Through the implementation of combined best practices, our operations team has accelerated the realization of higher operational efficiencies and reduced cycle times,” said Will Hickey, Co-CEO. “This will allow us to reduce our operated rig count sooner than anticipated, while drilling and completing the same amount of wells for the full year.”

(For a detailed table summarizing Permian Resources’ 2023 operational and financial guidance, please see the Appendix of this press release.)

Shareholder Returns

Permian Resources announced today that its Board of Directors declared a quarterly cash dividend of $0.05 per share of Class A common stock, or $0.20 per share on an annualized basis. The dividend is payable on March 15, 2023 to shareholders of record as of March 7, 2023. The Company’s base dividend represents an annualized yield of 2.1%, as of February 21, 2023.

Beginning in the first quarter of 2023, Permian Resources expects to initiate its variable return of capital program, which is structured to distribute at least 50% of free cash flow after the base dividend through a variable dividend, share repurchases or a combination of both. The Company’s inaugural variable dividend will be paid during the second quarter of 2023.

Year-End 2022 Proved Reserves

Permian Resources reported year-end 2022 total proved reserves of 582 MMBoe compared to 305 MMBoe at prior year-end. At year-end 2022, proved reserves consisted of 49% oil, 30% natural gas and 21% natural gas liquids. Proved developed reserves were 341 MMBoe (59% of total proved reserves) at December 31, 2022. Permian Resources had a standardized measure of discounted future net cash flows of $9.4 billion at December 31, 2022. The pre-tax present value at 10% (“Pre-tax PV 10%”, a non-GAAP financial measure reconciled within the Appendix) of Permian Resources’ total proved reserves was $11.7 billion at year-end.

Netherland Sewell & Associates, Inc., an independent reserve engineering firm, prepared Permian Resources’ year-end reserves estimates for the year ended December 31, 2022. (For additional information relating to our reserves, please see the Appendix of this press release.)

Annual Report on Form 10-K

Permian Resources’ financial statements and related footnotes will be available in its Annual Report on Form 10-K for the year ended December 31, 2022, which is expected to be filed with the Securities and Exchange Commission (“SEC”) on February 23, 2023.

Conference Call and Webcast

Permian Resources will host an investor conference call on Thursday, February 23, 2023 at 8:00 a.m. Central (9:00 a.m. Eastern) to discuss fourth quarter and full year 2022 operating and financial results. Interested parties may join the webcast by visiting Permian Resources’ website at www.permianres.com and clicking on the webcast link or by dialing (888) 886-7786 (Conference ID: 74862610) at least 15 minutes prior to the start of the call. A replay of the call will be available on the Company’s website or by phone at (877) 674-7070 (Access Code: 862610) for a 14-day period following the call.

About Permian Resources

Headquartered in Midland, Texas, Permian Resources is an independent oil and natural gas company focused on the responsible acquisition, optimization and development of high-return oil and natural gas properties. The Company’s assets and operations are located in the core of the Delaware Basin. For more information, please visit www.permianres.com.

Cautionary Note Regarding Forward-Looking Statements

The information in this press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact included in this press release, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this press release, the words “could,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “goal,” “plan,” “target” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.

Forward-looking statements may include statements about:

  • volatility of oil, natural gas and NGL prices or a prolonged period of low oil, natural gas or NGL prices and the effects of actions by, or disputes among or between, members of the Organization of Petroleum Exporting Countries, such as Saudi Arabia, and other oil and natural gas producing countries, such as Russia, with respect to production levels or other matters related to the price of oil;
  • political and economic conditions in or affecting other producing regions or countries, including the Middle East, Russia, Eastern Europe, Africa and South America;
  • the effects of excess supply of oil and natural gas resulting from the reduced demand caused by the Coronavirus Disease 2019 pandemic and the actions by certain oil and natural gas producing countries;
  • our business strategy and future drilling plans;
  • our reserves and our ability to replace the reserves we produce through drilling and property acquisitions;
  • our drilling prospects, inventories, projects and programs;
  • our financial strategy, return of capital program, leverage, liquidity and capital required for our development program;
  • our realized oil, natural gas and NGL prices;
  • the timing and amount of our future production of oil, natural gas and NGLs;
  • our ability to identify, complete and effectively integrate acquisitions of properties or businesses;
  • our ability to realize the anticipated benefits and synergies from the Merger and effectively integrate the assets of CRP and Colgate;
  • our hedging strategy and results;
  • our competition and government regulations;
  • our ability to obtain permits and governmental approvals;
  • our pending legal or environmental matters;
  • the marketing and transportation of our oil, natural gas and NGLs;
  • our leasehold or business acquisitions;
  • cost of developing or operating our properties;
  • our anticipated rate of return;
  • general economic conditions;
  • weather conditions in the areas where we operate;
  • credit markets;
  • our ability to make dividends and share repurchases;
  • uncertainty regarding our future operating results;
  • our plans, objectives, expectations and intentions contained in this press release that are not historical; and
  • the other factors described in our most recent Annual Report on Form 10-K, and any updates to those factors set forth in our subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the development, production, gathering and sale of oil and natural gas. These risks include, but are not limited to, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, risks relating to the merger, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating oil and gas reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures and the other risks described in our filings with the SEC.

Reserve engineering is a process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way. The accuracy of any oil and gas reserve estimate depends on the quality of available data, the interpretation of such data, and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil and natural gas that are ultimately recovered.

Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements, expressed or implied, included in this press release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this press release.

1) Adjusted Free Cash Flow and Net Debt-to-LQA EBITDAX are non-GAAP financial measures. See “Non-GAAP Financial Measures” included within the Appendix of this press release for related disclosures and reconciliations to the most directly comparable financial measures calculated and presented in accordance with GAAP.

Details of our 2023 operational and financial guidance are presented below:

 

 

2023 FY Guidance

Net average daily production (Boe/d)

155,000

168,000

Net average daily oil production (Bbls/d)

82,000

88,000

 

 

 

 

Production costs

 

 

 

Lease operating expenses ($/Boe)

$4.90

$5.50

Gathering, processing and transportation expenses ($/Boe)

$1.00

$1.20

Cash general and administrative ($/Boe)1

$1.20

$1.40

Severance and ad valorem taxes (% of revenue)

6.5%

8.5%

 

 

 

 

Total capital expenditure program ($MM)

$1,250

$1,450

 

 

 

 

Operated drilling program

 

 

 

TILs (gross)

~150

Average working interest

~85%

Average lateral length (feet)

~9,300

(1) Excludes stock-based compensation.

Permian Resources Corporation

Operating Highlights

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2022

 

2021

 

2022

 

2021

Net revenues (in thousands):

 

 

 

 

 

 

 

Oil sales

$

612,490

 

 

$

230,791

 

 

$

1,622,035

 

 

$

743,069

 

Natural gas sales

 

76,454

 

 

 

43,212

 

 

 

276,957

 

 

 

149,478

 

NGL sales

 

72,612

 

 

 

42,416

 

 

 

232,273

 

 

 

137,345

 

Oil and gas sales

$

761,556

 

 

$

316,419

 

 

$

2,131,265

 

 

$

1,029,892

 

 

 

 

 

 

 

 

 

 

Average sales price:

 

 

 

 

 

 

 

Oil (per Bbl)

$

81.81

 

 

$

72.78

 

 

$

88.95

 

 

$

63.50

 

Effect of derivative settlements on average price (per Bbl)

 

2.41

 

 

 

(10.36

)

 

 

(4.85

)

 

 

(10.19

)

Oil net of hedging (per Bbl)

$

84.22

 

 

$

62.42

 

 

$

84.10

 

 

$

53.31

 

 

 

 

 

 

 

 

 

Average NYMEX price for oil (per Bbl)

$

82.64

 

 

$

77.09

 

 

$

94.24

 

 

$

67.89

 

Oil differential from NYMEX

 

(0.84

)

 

 

(4.31

)

 

 

(5.29

)

 

 

(4.39

)

 

 

 

 

 

 

 

 

Natural gas (per Mcf)

$

3.11

 

 

$

4.41

 

 

$

4.64

 

 

$

3.67

 

Effect of derivative settlements on average price (per Mcf)

 

0.43

 

 

 

(1.03

)

 

 

(0.53

)

 

 

(0.32

)

Natural gas net of hedging (per Mcf)

$

3.54

 

 

$

3.38

 

 

$

4.11

 

 

$

3.35

 

 

 

 

 

 

 

 

 

Average NYMEX price for natural gas (per Mcf)

$

5.55

 

 

$

4.74

 

 

$

6.38

 

 

$

3.84

 

Natural gas differential from NYMEX

 

(2.44

)

 

 

(0.33

)

 

 

(1.74

)

 

 

(0.17

)

 

 

 

 

 

 

 

 

NGL (per Bbl)

$

24.48

 

 

$

44.28

 

 

$

34.41

 

 

$

36.61

 

 

 

 

 

 

 

 

 

Net production:

 

 

 

 

 

 

 

Oil (MBbls)

 

7,487

 

 

 

3,170

 

 

 

18,235

 

 

 

11,701

 

Natural gas (MMcf)

 

24,610

 

 

 

9,808

 

 

 

59,692

 

 

 

40,741

 

NGL (MBbls)

 

2,966

 

 

 

958

 

 

 

6,750

 

 

 

3,752

 

Total (MBoe)(1)

 

14,556

 

 

 

5,764

 

 

 

34,934

 

 

 

22,243

 

 

 

 

 

 

 

 

 

Average daily net production:

 

 

 

 

 

 

 

Oil (Bbls/d)

 

81,378

 

 

 

34,468

 

 

 

49,958

 

 

 

32,058

 

Natural gas (Mcf/d)

 

267,503

 

 

 

106,613

 

 

 

163,539

 

 

 

111,619

 

NGL (Bbls/d)

 

32,246

 

 

 

10,412

 

 

 

18,494

 

 

 

10,278

 

Total (Boe/d)(1)

 

158,208

 

 

 

62,649

 

 

 

95,708

 

 

 

60,939

 

______________________
(1) Calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one Boe.

Permian Resources Corporation

Operating Expenses

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2022

 

2021

 

2022

 

2021

Operating costs (in thousands):

 

 

 

 

 

 

 

Lease operating expenses

$

73,289

 

 

$

28,897

 

 

$

171,867

 

 

$

106,419

 

Severance and ad valorem taxes

 

54,233

 

 

 

20,973

 

 

 

155,724

 

 

 

67,140

 

Gathering, processing, and transportation expense

 

20,246

 

 

 

21,613

 

 

 

97,915

 

 

 

85,896

 

Operating cost metrics:

 

 

 

 

 

 

 

Lease operating expenses (per Boe)

$

5.04

 

 

$

5.01

 

 

$

4.92

 

 

$

4.78

 

Severance and ad valorem taxes (% of revenue)

 

7.1

%

 

 

6.6

%

 

 

7.3

%

 

 

6.5

%

Gathering, processing, and transportation expense (per Boe)

 

1.39

 

 

 

3.75

 

 

 

2.80

 

 

 

3.86

 

Permian Resources Corporation

Consolidated Statements of Operations

(in thousands, except per share data)

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2022

 

2021

 

2022

 

2021

Operating revenues

 

 

 

 

 

 

 

Oil and gas sales

$

761,556

 

 

$

316,419

 

 

$

2,131,265

 

 

$

1,029,892

 

Operating expenses

 

 

 

 

 

 

 

Lease operating expenses

 

73,289

 

 

 

28,897

 

 

 

171,867

 

 

 

106,419

 

Severance and ad valorem taxes

 

54,233

 

 

 

20,973

 

 

 

155,724

 

 

 

67,140

 

Gathering, processing and transportation expenses

 

20,246

 

 

 

21,613

 

 

 

97,915

 

 

 

85,896

 

Depreciation, depletion and amortization

 

182,052

 

 

 

75,863

 

 

 

444,678

 

 

 

289,122

 

General and administrative expenses

 

75,617

 

 

 

20,643

 

 

 

159,554

 

 

 

110,454

 

Merger and integration expense

 

12,469

 

 

 

 

 

 

77,424

 

 

 

 

Impairment and abandonment expense

 

244

 

 

 

6,400

 

 

 

3,875

 

 

 

32,511

 

Exploration and other expenses

 

4,765

 

 

 

3,185

 

 

 

11,378

 

 

 

7,883

 

Total operating expenses

 

422,915

 

 

 

177,574

 

 

 

1,122,415

 

 

 

699,425

 

Net gain (loss) on sale of long-lived assets

 

13

 

 

 

34,422

 

 

 

(1,314

)

 

 

34,168

 

Proceeds from terminated sale of assets

 

 

 

 

 

 

 

 

 

 

5,983

 

Income (loss) from operations

 

338,654

 

 

 

173,267

 

 

 

1,007,536

 

 

 

370,618

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

Interest expense

 

(39,358

)

 

 

(13,931

)

 

 

(95,645

)

 

 

(61,288

)

Gain (loss) on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

(22,156

)

Net gain (loss) on derivative instruments

 

(60,019

)

 

 

1,860

 

 

 

(42,368

)

 

 

(148,825

)

Other income (expense)

 

291

 

 

 

124

 

 

 

609

 

 

 

395

 

Total other income (expense)

 

(99,086

)

 

 

(11,947

)

 

 

(137,404

)

 

 

(231,874

)

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

239,568

 

 

 

161,320

 

 

 

870,132

 

 

 

138,744

 

Income tax (expense) benefit

 

(40,860

)

 

 

(569

)

 

 

(120,292

)

 

 

(569

)

Net income (loss)

 

198,708

 

 

 

160,751

 

 

 

749,840

 

 

 

138,175

 

Less: Net (income) loss attributable to noncontrolling interest

 

(115,658

)

 

 

 

 

 

(234,803

)

 

 

 

Net income (loss) attributable to Class A Common Stock

$

83,050

 

 

$

160,751

 

 

$

515,037

 

 

$

138,175

 

 

 

 

 

 

 

 

 

Income (loss) per share of Class A Common Stock:

 

 

 

 

 

 

 

Basic

$

0.29

 

 

$

0.57

 

 

$

1.80

 

 

$

0.49

 

Diluted

$

0.26

 

 

$

0.51

 

 

$

1.61

 

 

$

0.46

 

 

 

 

 

 

 

 

 

Weighted average Class A Common Stock outstanding:

 

 

 

 

 

 

 

Basic

 

288,512

 

 

 

281,183

 

 

 

286,160

 

 

 

280,871

 

Diluted

 

329,454

 

 

 

315,748

 

 

 

322,816

 

 

 

310,170

 

Permian Resources Corporation

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

 

December 31, 2022

 

December 31, 2021

ASSETS

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

59,545

 

 

$

9,380

 

Accounts receivable, net

 

282,846

 

 

 

71,295

 

Derivative instruments

 

100,797

 

 

 

 

Prepaid and other current assets

 

20,602

 

 

 

5,860

 

Total current assets

 

463,790

 

 

 

86,535

 

Property and equipment

 

 

 

Oil and natural gas properties, successful efforts method

 

 

 

Unproved properties

 

1,424,744

 

 

 

1,040,386

 

Proved properties

 

8,869,174

 

 

 

4,623,726

 

Accumulated depreciation, depletion and amortization

 

(2,419,692

)

 

 

(1,989,489

)

Total oil and natural gas properties, net

 

7,874,226

 

 

 

3,674,623

 

Other property and equipment, net

 

15,173

 

 

 

11,197

 

Total property and equipment, net

 

7,889,399

 

 

 

3,685,820

 

Noncurrent assets

 

 

 

Operating lease right-of-use assets

 

64,792

 

 

 

16,385

 

Other noncurrent assets

 

74,611

 

 

 

15,854

 

TOTAL ASSETS

$

8,492,592

 

 

$

3,804,594

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities

 

 

 

Accounts payable and accrued expenses

$

562,156

 

 

$

130,256

 

Operating lease liabilities

 

29,759

 

 

 

1,413

 

Derivative instruments

 

1,998

 

 

 

35,150

 

Other current liabilities

 

11,656

 

 

 

1,080

 

Total current liabilities

 

605,569

 

 

 

167,899

 

Noncurrent liabilities

 

 

 

Long-term debt, net

 

2,140,798

 

 

 

825,565

 

Asset retirement obligations

 

40,947

 

 

 

17,240

 

Deferred income taxes

 

4,430

 

 

 

2,589

 

Operating lease liabilities

 

41,341

 

 

 

16,002

 

Other noncurrent liabilities

 

3,211

 

 

 

24,579

 

Total liabilities

 

2,836,296

 

 

 

1,053,874

 

 

 

 

 

Shareholders’ equity

 

 

 

Common stock, $0.0001 par value, 1,500,000,000 shares authorized:

 

 

 

Class A: 298,640,260 shares issued and 288,532,257 shares outstanding at December 31, 2022 and 294,260,623 shares issued and 284,696,972 shares outstanding at December 31, 2021

 

30

 

 

 

29

 

Class C: 269,300,000 shares issued and outstanding at December 31, 2022 and no shares issued or outstanding at December 31, 2021

 

27

 

 

 

 

Additional paid-in capital

 

2,698,465

 

 

 

3,013,017

 

Retained earnings (accumulated deficit)

 

237,226

 

 

 

(262,326

)

Total shareholders’ equity

 

2,935,748

 

 

 

2,750,720

 

Noncontrolling interest

 

2,720,548

 

 

 

 

Total equity

 

5,656,296

 

 

 

2,750,720

 

TOTAL LIABILITIES AND EQUITY

$

8,492,592

 

 

$

3,804,594

 

Permian Resources Corporation

Consolidated Statements of Cash Flows

(in thousands)

 

 

Year Ended December 31,

 

2022

 

2021

Cash flows from operating activities:

 

 

 

Net income (loss)

$

749,840

 

 

$

138,175

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

Depreciation, depletion and amortization

 

444,678

 

 

 

289,122

 

Stock-based compensation expense - equity awards

 

116,480

 

 

 

37,541

 

Stock-based compensation expense - liability awards

 

(24,174

)

 

 

20,573

 

Impairment and abandonment expense

 

3,875

 

 

 

32,511

 

Exploratory dry hole costs

 

 

 

 

 

Deferred tax expense (benefit)

 

119,679

 

 

 

569

 

Net (gain) loss on sale of long-lived assets

 

1,314

 

 

 

(34,168

)

Non-cash portion of derivative (gain) loss

 

(77,737

)

 

 

16,700

 

Amortization of debt issuance costs and debt discount

 

15,362

 

 

 

4,992

 

(Gain) loss on extinguishment of debt

 

 

 

 

22,156

 

Changes in operating assets and liabilities:

 

 

 

(Increase) decrease in accounts receivable

 

(66,824

)

 

 

(21,475

)

(Increase) decrease in prepaid and other assets

 

(1,751

)

 

 

2,907

 

Increase (decrease) in accounts payable and other liabilities

 

90,929

 

 

 

16,016

 

Net cash provided by operating activities

 

1,371,671

 

 

 

525,619

 

Cash flows from investing activities:

 

 

 

Acquisition of oil and natural gas properties

 

(8,858

)

 

 

(6,510

)

Drilling and development capital expenditures

 

(771,577

)

 

 

(319,640

)

Cash paid for business acquired in the Merger, net of cash acquired

 

(496,671

)

 

 

 

Purchases of other property and equipment

 

(3,563

)

 

 

(901

)

Proceeds from sales of oil and natural gas properties

 

75,620

 

 

 

100,575

 

Net cash used in investing activities

 

(1,205,049

)

 

 

(226,476

)

Cash flows from financing activities:

 

 

 

Proceeds from borrowings under revolving credit facility

 

1,115,000

 

 

 

570,000

 

Repayment of borrowings under revolving credit facility

 

(755,000

)

 

 

(875,000

)

Repayment of credit facility acquired in the Merger

 

(400,000

)

 

 

 

Proceeds from issuance of senior notes

 

 

 

 

170,000

 

Debt exchange and debt issuance costs

 

(19,833

)

 

 

(6,421

)

Premiums paid on capped call transactions

 

 

 

 

(14,688

)

Redemption of senior secured notes

 

 

 

 

(127,073

)

Proceeds from exercise of stock options

 

109

 

 

 

132

 

Dividends Paid

 

(14,426

)

 

 

 

Distributions paid to noncontrolling interest owners

 

(13,465

)

 

 

 

Class A Common Stock repurchased from employees for taxes due upon share vestings

 

(19,010

)

 

 

(14,497

)

Net cash (used in) provided by financing activities

 

(106,625

)

 

 

(297,547

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

59,997

 

 

 

1,596

 

Cash, cash equivalents and restricted cash, beginning of period

 

9,935

 

 

 

8,339

 

Cash, cash equivalents and restricted cash, end of period

$

69,932

 

 

$

9,935

 

Reconciliation of cash, cash equivalents and restricted cash presented on the consolidated statements of cash flows for the periods presented:

 

 

Year Ended December 31,

 

2022

 

2021

Cash and cash equivalents

$

59,545

 

$

9,380

Restricted cash

$

10,387

 

$

555

Total cash, cash equivalents and restricted cash

$

69,932

 

$

9,935

Non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), our earnings release contains non-GAAP financial measures as described below.

Adjusted EBITDAX

Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. We define Adjusted EBITDAX as net income attributable to Class A Common Stock before net income/loss attributable to noncontrolling interest, interest expense, income taxes, depreciation, depletion and amortization, impairment and abandonment expense, non-cash gains or losses on derivatives, stock-based compensation (not cash-settled), exploration and other expenses, merger and integration expense, gain/loss from the sale of long-lived assets and non-recurring items. Adjusted EBITDAX is not a measure of net income as determined by GAAP.

Our management believes Adjusted EBITDAX is useful as it allows them to more effectively evaluate our operating performance and compare the results of our operations from period to period and against our peers, without regard to our financing methods or capital structure. We exclude the items listed above from net income in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX. Our presentation of Adjusted EBITDAX should not be construed as an inference that our results will be unaffected by unusual or nonrecurring items. Our computations of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies.

The following table presents a reconciliation of Adjusted EBITDAX to net income, which is the most directly comparable financial measure calculated and presented in accordance with GAAP:

 

Three Months Ended

(in thousands)

12/31/2022

 

9/30/2022

 

6/30/2022

 

3/31/2022

 

12/31/2021

Adjusted EBITDAX reconciliation to net income:

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Class A Common Stock

$

83,050

 

 

$

224,359

 

 

$

191,826

 

 

$

15,802

 

 

$

160,751

 

Net income (loss) attributable to noncontrolling interest

 

115,658

 

 

 

119,145

 

 

 

 

 

 

 

 

 

 

Interest expense

 

39,358

 

 

 

28,807

 

 

 

14,326

 

 

 

13,154

 

 

 

13,931

 

Income tax expense (benefit)

 

40,860

 

 

 

31,169

 

 

 

41,487

 

 

 

6,776

 

 

 

569

 

Depreciation, depletion and amortization

 

182,052

 

 

 

109,500

 

 

 

82,117

 

 

 

71,009

 

 

 

75,863

 

Impairment and abandonment expense

 

244

 

 

 

498

 

 

 

506

 

 

 

2,627

 

 

 

6,400

 

Non-cash derivative (gain) loss

 

88,635

 

 

 

(213,503

)

 

 

(39,514

)

 

 

86,645

 

 

 

(44,790

)

Stock-based compensation expense(1)

 

54,342

 

 

 

18,896

 

 

 

(2,487

)

 

 

18,834

 

 

 

5,594

 

Exploration and other expenses

 

4,765

 

 

 

2,352

 

 

 

1,954

 

 

 

2,307

 

 

 

3,185

 

Merger and integration expense

 

12,469

 

 

 

59,270

 

 

 

5,685

 

 

 

 

 

 

 

(Gain) loss on sale of long-lived assets

 

(13

)

 

 

3

 

 

 

1,406

 

 

 

(82

)

 

 

(34,422

)

Adjusted EBITDAX

$

621,420

 

 

$

380,496

 

 

$

297,306

 

 

$

217,072

 

 

$

187,081

 

(1)

Includes stock-based compensation for equity awards and also for cash-based liability awards that have not yet been settled in cash, both of which relate to general and administrative employees only. Stock-based compensation amounts for geographical and geophysical personnel are included within the Exploration and other expenses line item.

Net Debt-to-LQA EBITDAX

Net debt-to-LQA EBITDAX is a non-GAAP financial measure. We define net debt as long-term debt, net, plus unamortized debt discount and debt issuance costs on our senior notes minus cash and cash equivalents.

We define net debt-to-LQA EBITDAX as net debt (defined above) divided by Adjusted EBITDAX (defined and reconciled in the section above) for the three months ended December 31, 2022, on an annualized basis. We refer to this metric to show trends that investors may find useful in understanding our ability to service our debt. This metric is widely used by professional research analysts, including credit analysts, in the valuation and comparison of companies in the oil and gas exploration and production industry. The following table presents a reconciliation of net debt to long-term debt, net and the calculation of net debt-to-LQA EBITDAX for the period presented:

(in thousands)

December 31, 2022

Long-term debt, net

2,140,798

 

Unamortized debt discount and debt issuance costs on senior notes

60,001

 

Long-term debt

2,200,799

 

Less: cash and cash equivalents

(59,545

)

Net debt (Non-GAAP)

2,141,254

 

LQA EBITDAX(1)

2,485,680

 

Net debt-to-LQA EBITDAX

0.9

 

_________________________

(1) Represents adjusted EBITDAX (defined and reconciled in the section above) for the three months ended December 31, 2022, on an annualized basis.

Free Cash Flow and Adjusted Free Cash Flow

Free cash flow and adjusted free cash flow are supplemental non-GAAP financial measures that are used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. We define free cash flow as net cash provided by operating activities before changes in working capital, less incurred capital expenditures and adjusted free cash flow as free cash flow before non-recurring merger and integration expense.

Our management believes free cash flow and adjusted free cash flow are useful indicators of the Company’s ability to internally fund its exploration and development activities and to service or incur additional debt, without regard to the timing of settlement of either operating assets and liabilities or accounts payable related to capital expenditures. The Company believes that these measures, as so adjusted, present meaningful indicators of the Company’s actual sources and uses of capital associated with its operations conducted during the applicable period. Our computations of free cash flow and adjusted free cash flow may not be comparable to other similarly titled measures of other companies. Free cash flow and adjusted free cash flow should not be considered as alternatives to, or more meaningful than, net cash provided by operating activities as determined in accordance with GAAP or as indicators of our operating performance or liquidity.

Free cash flow and adjusted free cash flow are not financial measures that are determined in accordance with GAAP. Accordingly, the following table presents a reconciliation of free cash flow and adjusted free cash flow to net cash provided by operating activities, which is the most directly comparable financial measure calculated and presented in accordance with GAAP:

 

Three Months Ended December 31,

(in thousands)

2022

 

2021

Net cash provided by operating activities

$

528,295

 

 

$

192,487

 

Changes in working capital:

 

 

 

Accounts receivable

 

60,071

 

 

 

(21,523

)

Prepaid and other assets

 

1,713

 

 

 

(1,104

)

Accounts payable and other liabilities

 

(21,290

)

 

 

1,433

 

Operating cash flow before working capital changes

 

568,789

 

 

 

171,293

 

Less: total capital expenditures incurred

 

(325,200

)

 

 

(86,500

)

Free cash flow

 

243,589

 

 

 

84,793

 

Merger and integration expense

 

12,469

 

 

 

 

Adjusted free cash flow

$

256,058

 

 

$

84,793

 

The following table summarizes the approximate volumes and average contract prices of the hedge contracts the Company had in place as of December 31, 2022 and additional contracts entered into through February 17, 2023:

 

Period

 

Volume (Bbls)

 

Volume

(Bbls/d)

 

Wtd. Avg. Crude Price ($/Bbl)(1)

Crude oil swaps

January 2023 - March 2023

 

1,575,000

 

17,500

 

$90.58

 

April 2023 - June 2023

 

1,592,500

 

17,500

 

87.64

 

July 2023 - September 2023

 

1,472,000

 

16,000

 

86.36

 

October 2023 - December 2023

 

1,472,000

 

16,000

 

84.11

 

January 2024 - March 2024

 

1,092,000

 

12,000

 

78.46

 

April 2024 - June 2024

 

1,092,000

 

12,000

 

77.30

 

July 2024 - September 2024

 

1,104,000

 

12,000

 

76.21

 

October 2024 - December 2024

 

1,104,000

 

12,000

 

75.27

 

 

 

 

 

 

 

 

 

Period

 

Volume (Bbls)

 

Volume

(Bbls/d)

 

Wtd. Avg. Collar Price Ranges

($/Bbl)(2)

Crude oil collars

January 2023 - March 2023

 

810,000

 

9,000

 

$75.56 - $91.15

 

April 2023 - June 2023

 

819,000

 

9,000

 

75.56 - 91.15

 

July 2023 - September 2023

 

644,000

 

7,000

 

76.43 - 92.70

 

October 2023 - December 2023

 

644,000

 

7,000

 

76.43 - 92.70

 

 

 

 

 

 

 

 

 

Period

 

Volume (Bbls)

 

Volume

(Bbls/d)

 

Wtd. Avg. Differential ($/Bbl)(3)

Crude oil basis differential swaps

January 2023 - March 2023

 

729,999

 

8,111

 

$0.55

 

April 2023 - June 2023

 

739,499

 

8,126

 

0.55

 

July 2023 - September 2023

 

749,000

 

8,141

 

0.52

 

October 2023 - December 2023

 

749,002

 

8,141

 

0.52

 

January 2024 - March 2024

 

637,000

 

7,000

 

0.43

 

April 2024 - June 2024

 

637,000

 

7,000

 

0.43

 

July 2024 - September 2024

 

644,000

 

7,000

 

0.43

 

October 2024 - December 2024

 

644,000

 

7,000

 

0.43

 

 

 

 

 

 

 

 

 

Period

 

Volume (Bbls)

 

Volume (Bbls/d)

 

Wtd. Avg. Differential

($/Bbl)(4)

Crude oil roll differential swaps

January 2023 - March 2023

 

1,350,000

 

15,000

 

$1.34

 

April 2023 - June 2023

 

1,365,000

 

15,000

 

1.25

 

July 2023 - September 2023

 

1,380,000

 

15,000

 

1.23

 

October 2023 - December 2023

 

1,380,000

 

15,000

 

1.22

 

January 2024 - March 2024

 

637,000

 

7,000

 

0.75

 

April 2024 - June 2024

 

637,000

 

7,000

 

0.74

 

July 2024 - September 2024

 

644,000

 

7,000

 

0.73

 

October 2024 - December 2024

 

644,000

 

7,000

 

0.72

________________________

(1)

These crude oil swap transactions are settled based on the NYMEX WTI index price on each trading day within the specified monthly settlement period versus the contractual swap price for the volumes stipulated.

(2)

These crude oil collars are settled based on the NYMEX WTI index price on each trading day within the specified monthly settlement period versus the contractual floor and ceiling prices for the volumes stipulated.

(3)

These crude oil basis swap transactions are settled based on the difference between the arithmetic average of ARGUS MIDLAND WTI and ARGUS WTI CUSHING indices, during each applicable monthly settlement period.

(4)

These crude oil roll swap transactions are settled based on the difference between the arithmetic average of NYMEX WTI calendar month prices and the physical crude oil delivery month price.

 

Period

 

Volume (MMBtu)

 

Volume (MMBtu/d)

 

Wtd Avg. Gas Price

($/MMBtu)(1)

Natural gas swaps

January 2023 - March 2023

 

1,670,157

 

18,557

 

$7.64

 

April 2023 - June 2023

 

1,572,752

 

17,283

 

4.70

 

July 2023 - September 2023

 

1,486,925

 

16,162

 

4.70

 

October 2023 - December 2023

 

1,413,628

 

15,366

 

4.90

 

January 2024 - March 2024

 

464,919

 

5,109

 

5.01

 

April 2024 - June 2024

 

446,321

 

4,905

 

3.93

 

July 2024 - September 2024

 

429,388

 

4,667

 

4.01

 

October 2024 - December 2024

 

413,899

 

4,499

 

4.32

 

 

 

 

 

 

 

 

 

Period

 

Volume (MMBtu)

 

Volume (MMBtu/d)

 

Wtd. Avg. Collar Price Ranges

($/MMBtu)(2)

Natural gas collars

January 2023 - March 2023

 

7,104,843

 

78,943

 

$4.67 - $10.33

 

April 2023 - June 2023

 

6,389,748

 

70,217

 

3.64 - 7.62

 

July 2023 - September 2023

 

6,563,075

 

71,338

 

3.64 - 7.52

 

October 2023 - December 2023

 

6,636,372

 

72,134

 

3.66 - 8.22

 

January 2024 - March 2024

 

3,175,081

 

34,891

 

3.36 - 9.44

 

April 2024 - June 2024

 

1,373,679

 

15,095

 

3.00 - 6.45

 

July 2024 - September 2024

 

1,410,612

 

15,333

 

3.00 - 6.52

 

October 2024 - December 2024

 

1,426,101

 

15,501

 

3.25 - 7.30

 

 

 

 

 

 

 

 

 

Period

 

Volume (MMBtu)

 

Volume (MMBtu/d)

 

Wtd. Avg. Differential

($/MMBtu)(3)

Natural gas basis differential swaps

January 2023 - March 2023

 

6,075,000

 

67,500

 

$(1.10)

 

April 2023 - June 2023

 

6,142,500

 

67,500

 

(1.30)

 

July 2023 - September 2023

 

6,210,000

 

67,500

 

(1.30)

 

October 2023 - December 2023

 

6,210,000

 

67,500

 

(1.30)

 

January 2024 - March 2024

 

1,820,000

 

20,000

 

(0.59)

 

April 2024 - June 2024

 

1,820,000

 

20,000

 

(0.67)

 

July 2024 - September 2024

 

1,840,000

 

20,000

 

(0.66)

 

October 2024 - December 2024

 

1,840,000

 

20,000

 

(0.64)

________________________

(1)

These natural gas swap contracts are settled based on the NYMEX Henry Hub price on each trading day within the specified monthly settlement period versus the contractual swap price for the volumes stipulated.

(2)

These natural gas collars are settled based on the NYMEX Henry Hub price on each trading day within the specified monthly settlement period versus the contractual floor and ceiling prices for the volumes stipulated.

(3)

These natural gas basis swap contracts are settled based on the difference between the inside FERC’s West Texas WAHA price and the NYMEX price of natural gas, during each applicable monthly settlement period.

The following table summarizes estimated proved reserves, pre-tax PV 10%, and standardized measure of discounted future cash flows for the periods indicated:

 

December 31, 2022

 

December 31, 2021

 

December 31, 2020

Proved developed reserves:

 

 

 

 

 

Oil (MBbls)

 

156,941

 

 

 

77,973

 

 

 

70,716

 

Natural gas (MMcf)

 

652,270

 

 

 

326,223

 

 

 

279,556

 

NGL (MBbls)

 

74,940

 

 

 

30,318

 

 

 

31,672

 

Total proved developed reserves (MBoe)(1)

 

340,593

 

 

 

162,662

 

 

 

148,981

 

Proved undeveloped reserves:

 

 

 

 

 

Oil (MBbls)

 

130,091

 

 

 

75,480

 

 

 

79,776

 

Natural gas (MMcf)

 

381,301

 

 

 

250,782

 

 

 

248,231

 

NGL (MBbls)

 

47,911

 

 

 

25,265

 

 

 

28,773

 

Total proved undeveloped reserves (MBoe)(1)

 

241,553

 

 

 

142,542

 

 

 

149,921

 

Total proved reserves:

 

 

 

 

 

Oil (MBbls)

 

287,032

 

 

 

153,453

 

 

 

150,492

 

Natural gas (MMcf)

 

1,033,571

 

 

 

577,005

 

 

 

527,787

 

NGL (MBbls)

 

122,851

 

 

 

55,583

 

 

 

60,445

 

Total proved reserves (MBoe)(1)

 

582,146

 

 

 

305,204

 

 

 

298,902

 

 

 

 

 

 

 

Proved developed reserves %

 

59

%

 

 

53

%

 

 

50

%

Proved undeveloped reserves %

 

41

%

 

 

47

%

 

 

50

%

 

 

 

 

 

 

Reserve values (in millions):

 

 

 

 

 

Standard measure of discounted future net cash flows

$

9,425.6

 

 

$

3,396.3

 

 

$

1,184.7

 

Discounted future income tax expense

 

2,289.1

 

 

 

481.2

 

 

 

4.4

 

Total proved pre-tax PV 10%(2)

$

11,714.7

 

 

$

3,877.5

 

 

$

1,189.1

 

(1)

Calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one Boe.

(2)

Total proved pre-tax PV 10% (“Pre-tax PV 10%”) is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, and it is derived from the standardized measure of discounted future net cash flows (the ‘‘Standardized Measure’’), which is the most directly comparable GAAP financial measure. Pre-tax PV 10% is computed on the same basis as the Standardized Measure but without deducting future income taxes. We believe Pre-tax PV 10% is a useful measure for investors when evaluating the relative monetary significance of our oil and natural gas properties. We further believe investors may utilize our Pre-tax PV 10% as a basis for comparison of the relative size and value of our proved reserves to other companies because many factors that are unique to each individual company impact the amount of future income taxes to be paid. However, Pre-tax PV 10% is not a substitute for the Standardized Measure. Our Pre-tax PV 10% and Standardized Measure do not purport to present the fair value of our proved oil, NGL and natural gas reserves.

 

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