PR - NYSE

Good morning. And welcome to Permian Resources Corporation's conference call to discuss its fourth quarter and full year 2024 earnings. Today's call is being recorded. A replay of the call will be accessible until March 6, 2025, by dialing 888-660-6264 and entering the replay access code 750775050 or by visiting the company's website at www.permianresources.com. At this time, I will turn the call over to Hays Mabry, Permian Resources Corporation's Vice President of Investor Relations, for some opening remarks. Please go ahead.

And thank you all for joining us. On the call today are Will Hickey and James Walter, our Chief Executive Officers, and Guy Oliphint, our Chief Financial Officer. I would like to note that many of the comments during this call are forward-looking statements that involve risks and uncertainties that could affect our actual results or plans. Many of these risks are beyond our control and are discussed in more detail in the risk factors and the forward-looking statements sections of our filings with the SEC. Although we believe the expectations expressed are based on reasonable assumptions, they are not guarantees of future performance, and actual results may differ materially. We may also refer to non-GAAP financial measures. For any non-GAAP measure we use, a reconciliation to the nearest corresponding GAAP measure can be found in our earnings release or presentation. With that, I will turn the call over to Will Hickey, Co-CEO.

We are excited to discuss our fourth quarter results as well as lay out our 2025 plan this morning. We reported a record quarter in both production and free cash flow per share in Q4, demonstrating that the business continues to perform extremely well, led by outstanding execution in the field. Additionally, we saw a relentless focus on cost control manifest into lower DMC cost, controllable cash cost when compared to Q3. Over the full year of 2024, our team delivered outstanding results, resulting in a nearly 50% increase compared to 2023. Even more impressive, we achieved this without increasing leverage, reflecting the strength and consistency of our core operations. As a result, we believe 2024 represents a highly repeatable year, positioning us for sustained performance and growth. As we look to 2025, we expect to continue maximizing shareholder value by executing on our highly capital-efficient Delaware Basin drilling program. Proud to lay out a 2025 plan expected to continue to generate significant free cash flow per share growth. Moving into quarterly results, Q4 production exceeded expectations with oil production of 171,000 barrels of oil per day and total production of 368,000 barrels of oil equivalent per day. The CNC team also continues to execute at an extremely high level, which led to 275 wells drilled in 2024. Importantly, we executed on this plan with CapEx remaining well within our original guidance range of $1.9 billion to $2.1 billion. In addition, we delivered leading cash costs supporting strong margins, with Q4 LOE of $5.42 per BOE, cash G&A of $0.93 per BOE, and GPT of $1.49 per BOE. Strong production results paired with low cash costs and CapEx of $504 million in the quarter resulted in adjusted operating cash flow of $904 million and adjusted free cash flow of $400 million. Turning to slide four, we wanted to provide a quick review of how strong a year 2024 was for Permian Resources Corporation. We were able to beat and/or raise production guidance every quarter on just the base outperform. When including the bolt-on acquisitions we closed throughout the year, delivered 8% higher oil production when compared to our original 2024 guidance. Our cost controls also performed extremely well as most recent well costs were almost 20% lower compared to 2023. Most importantly, a little over half of this reduction was a direct result of structural efficiency improvements gained throughout the year. The balance was a result of service cost deflation. We also rolled out an enhanced capital return program during 2024 that prioritizes a leading base dividend for our shareholders. This change is underpinned by the material improvements in free cash flow per share generation of our business, which we will touch on more in just a little bit. Lastly, during 2024, we were able to increase our liquidity by approximately $1 billion, showcasing our ability to maintain a very strong financial position with no change in leverage while executing on $1.2 billion of accretive M&A. We have and will continue to prioritize maintaining a fortress balance sheet as we believe this allows us to maintain flexibility and be opportunistic through the commodity price cycles. Slide five illustrates our expertise and cost leadership in the Delaware Basin. Our relentless focus on low-cost leadership allows us to drive both D&C and controllable cash cost peer-leading levels. The 2025 plan, which James will outline here in a minute, benefits greatly from the reduction in all-in costs we have seen over the past year. Given the marginal nature of free cash flow, running a low-cost business is critical in supporting strong free cash flow per share. Turning to slide six, we want to highlight the success of our 2024 M&A program. We executed on approximately $1.2 billion of acquisitions for 50,000 net acres and about 20,000 barrels of oil equivalent per day across our acreage position. The mix of acquisitions consisted of a large asset deal in Bria Draw, several smaller bolt-on acquisitions, and finally a substantial ground game that consisted of over 500 transactions for 4,000 net acres. We believe that expertise in executing each of these types of transactions provides Permian Resources Corporation the means to continue to replace our drill locations with high rate of return inventory that immediately competes for capital. As you can see, these acquisitions more than replace the inventory that we drilled throughout 2024 with similar or better rates of return to our 2024 development. We plan on continuing our strong track record of pursuing accretive M&A that adds near-term, mid-term, and long-term value to shareholders. Now looking at slide seven, we want to highlight a big reason for why we have been so successful at M&A that creates value for shareholders. One of our sustainable competitive advantages is our ability to buy acreage in areas where we can apply Permian Resources Corporation's leading cost structure to the acquired assets immediately. Specifically, when we compared the last seven months of LOE on assets prior to acquisition, we have already driven a $3 per BOE reduction at the asset base. This is largely achieved through our lean field organization, technical expertise in artificial lift, optimized chemical programs, and a leading field compression team that maximizes production while reducing downtime. Similarly, on the D&C side, we have reduced costs by over $300 per lateral foot when compared to the prior operator's most recent wells. Our leading cycle times, completion optimization, and sourcing of key materials with scale support these improvements. We are confident that our ability to execute at this level will allow us to continue to find Delaware Basin opportunities and attractive returns. That, I will turn it over to James to go over our 2025 plans.

Thanks, Will. Turn to slide eight where I discuss our 2025 business plan. It is focused on maximizing returns and free cash flow per share through consistent, thoughtful capital allocation and low-cost execution. Our plan is a result of a tremendous amount of effort from every department of Permian Resources Corporation. I want to thank our entire team for the hard work that went into pulling this all together. For the full year 2025, we expect total production to average between 300,000 and 380,000 BOE per day. Oil production averaged between 170,000 and 175,000 barrels of oil per day. This plan delivers 8% higher annual oil production compared to the full year 2024. Our capital program consists of approximately $2 billion, which is less than 2024 despite the higher production base, showing materially improved capital efficiency year over year. Eighty percent of the capital program is allocated to drilling and completion operations, where we expect the term line to approximate 85 wells this year, roughly the same dock inventory as we carried in 2024. The remaining 20% is primarily investments in infrastructure that position Permian Resources Corporation to continue to drive value in 2025 and beyond. Our development program in Wellness will be largely the same as last year. We will continue to be focused on our high-returning Delaware Basin asset, with New Mexico accounting for about 65% of our activity, the Texas Delaware accounting for about 30%, and the Midland Basin getting the balance. We expect our average working age to be approximately 75%, which is in line with 2024, and our average lateral length to increase to approximately 10,000 feet. We expect our controllable cash cost to be approximately $7.75 per BOE. As we mentioned earlier, we believe to be the lowest cost in the Permian. Additionally, we have continued to optimize our tax planning strategies and expect approximately $25 million in current taxes for 2025 at strip prices. The combination of the same or better well productivity with lower costs across the board drives meaningfully improved capital efficiency and lower breakevens in 2025. Turning to slide nine, our balance sheet reflects the same pull around low leverage and high liquidity we have shown since the founding of our predecessor company. We maintained leverage right at one times through the course of 2024 while doing $1.2 billion in acquisitions. We expect to exit 2025 at approximately 0.5 times levered, assuming current strip prices. As mentioned earlier, we exit the year with $3 billion in liquidity, including approximately $500 million in cash. This positions us to be opportunistic in any environment as we believe market dislocations represent some of the greatest value creation opportunities in this sector. We have also protected our downside through hedging, with approximately 25% of our crude oil hedged at $73, strong oil and gas hedges for the next few years. The next strategic priority for our balance sheet is the achievement of investment-grade status, which we think could come before the end of the year given our consistent conservative financial policies and lower leverage than many of our investment-grade peers. We paid our first $0.15 per share base dividend in November, our current base dividend yield is over 4%, highlighting the relative value that Permian Resources Corporation stock represents today. Importantly, the improvement of business fundamentals we have highlighted throughout the deck has driven our post-dividend free cash flow breakeven down to approximately $40, which highlights the sustainability of our plan. Turning to slide ten, we wanted to go back to 2023 to highlight some of the performance metrics that have helped drive the outsized investor returns we will highlight on the following slide. As most of you know, our sole focus is creating value on a per-share basis. Our teams have positioned us to deliver substantial period growth on key per-share metrics like production per share and free cash flow per share. From 2023 to 2025, we will grow production per debt-adjusted share by approximately 50%, or reducing our cost structure in a material way during that same time period. And the end result is our free cash flow per share almost doubles from just over $1 per share in 2023 to over $2 per share in 2025. Slide eleven shows the public results of the improvements to our business we had on slide ten. Our team's tireless focus on value creation and free cash flow per share growth has led to best-in-class total shareholder returns every year since the COVID's continual merger in 2020. As you can see, turning to slide twelve, the majority of the shareholder value has come from improvements in the quality of our business rather than a rerating of our multiple. Even with our industry-leading PSR the past two years, we believe that Permian Resources Corporation is well-positioned to continue to create outside value for investors. Our go-forward value creation potential is underpinned by an industry-leading cost structure, low breakevens, and long-dated higher return inventory, together have driven leading returns for investors. Thank you for tuning in today, and now we will turn it back to the operator for Q&A.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. You will hear a prompt that your hand has been raised. And should you wish to cancel the request, please press star forward at two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from the line of Scott Hanold from RBC Capital Markets. Please go ahead.

Yeah. Thanks. Good morning. Morning. You know, you discussed a little bit about your plan in 2025 and a lot of regional similarities. Can you give a little color around the target formations and co-development that provide you confidence in the sustainability of the economics as you move forward and what is your visibility on that right now in terms of duration?

Yeah. I mean, it is shockingly similar both to kind of allocation across states, basins, and zones. I mean, you will see average pad size may creep up a little bit just some of the Woks were drilling set up for larger scale development, but really, it is the same zone. You know, it will be a lot of the same zones in New Mexico, Texas, and Midland Basin that we have done for previous years. And, really, I would say our inventory position has not changed. We follow kind of the M&A slides in there we have been able to basically replace everything we have drilled for two years in a row now. So you know, we still sit with, you know, high confident fifteen-year inventory with kind of the first half of that showing very little degradation from what we are doing today.

Yeah. And that is great. And that kind of leads to my next kind of question. In terms of, you know, the M&A strategy going forward. And you know, as you replace this inventory, you replace, you know, very similar quality stuff and you know, what is your view on larger scale M&A? It seems like you know, sort of the trend in the sector is, you know, getting bigger deals to, you know, enhance your scale, enhance the duration of the inventory, and lower cost. Like, when you look at larger scale deals in the Delaware, you know, how much did you all see is left you know, that could be targets?

You know, I think that M&A landscape overall, I think we see a pretty interesting and attractive kind of market backdrop as we head into 2025. I think it looks pretty similar to the last couple of years in the years before COVID, which have been kind of fruitful if people can find and do the right deals. I think, you know, in terms of scale, I we have been more focused on the kind of smaller deals. I think the biggest deal we have done on the cash side was the Oxybury Draw deal we announced in Q3. And I think we find that deals tend to have higher quality inventory and represent better values. You know, I think the bigger deals we have seen especially on the private side in the Delaware, it tended to be very production heavy and probably not as long-lived on the inventory side of things and so I think, you know, our focus has been more on the smaller deals, kind of the hundreds of millions of dollars and smaller. We would be happy to look at bigger deals. We have looked at quite a few of them, and if we found the one that was the right fit, the right quality, and we believe truly made our business better over the long term, I think we would be excited to do something bigger, but we see more value on the smaller end and probably the same going forward, but, you know, know what the market is going to bring and you can assume we are looking at everything.

Appreciate that. Thank you.

Thank you. And your next question comes from the line of Neal Dingmann from Truist Securities. Please go ahead.

Hi, Morgan. Thanks for the time. Will, maybe my first question for you is just around the operational efficiency as you continue this trend. Now do yourself. It is just sort of quarter in quarter, Adam. And is part of this driven by the continued integration of new assets? And does that help? Or really what continues to be the driver just you know, when you guys are able to do this in the quarter?

I would say, really, that is just the culture that we have built around here. We have got a team of highly motivated, highly skilled people that are really working every day to try to better what they did the quarter before. That is the culture that is ingrained in Permian Resources Corporation. You know, M&A, I would say, M&A allows us to showcase that. M&A allows us to leverage our cost structure to buy deals at high rate of return and kind of immediately apply that cost structure where you can see kind of the synergies as quick as the first month after acquisition, but I would not say M&A makes us better. You know, I think on the margin, it probably gives us some scale and some purchasing power. But, really, kind of the day-to-day grinding out hours, days, minutes on the drilling side and finding ways to optimize completions to lower cost is was really just a cultural thing granted in Permian Resources Corporation and I think we benefit a lot from being in Midland and really being focused on one basin. You know, there is a lot of value in being kind of hyper-focused on one basin in Midland and I think you are kind of the culmination of the culture with that is what drives the performance.

Great point. Thanks, Will. And then James, maybe just a second one for you on shareholder return. I am just wondering, you know, I for one want to say, you know, you all just mean, I am going crazy thinking you have to pay out 100% or you are going to get that, but 15% yield dividend. Just wondering when you sort of see that free cash flow statement if it is, do you think what do you think is appropriate shareholder return value this year going make sure how do you sort of see that strategy?

Yeah. I mean, I think we you know, as you said, a lot of base dividend is core of our shareholder returns program, and we paid our we all got our first $0.15 per share base dividend in November. So I think we are all really excited about that. I think we like the strong dividend yield. I think it reflects the kind of value proposition it feels really sustainable. Like I said on the call, I think, you know, that is sustainable at a cash flow breakeven. Post dividend down to $40, I think feels really, really good. I think going forward, look, our I think our number one goal is to continue to increase the base dividend on an annual basis. We all think that is the kind of a key criteria to have a healthy high-quality growing business is a sustainably growing base dividend. So I think that is our first priority. And then beyond that, I think that kind of capital allocation post base dividend is going to depend on the opportunity set in front of us. You know, I think that could be what it has been the last couple of months is it is putting cash on the balance sheet and paying down some debt. You know, I think over time, could be interesting opportunities on the share buyback side or on the strategic acquisition side. And looking at all that, and I think we are kind of making the decision every day, every week, every month what we think is going to drive the highest return for shareholders, and that is where the kind of rest of the cash is going to go.

Okay. Yeah. Love the answer. Well done, guys. Thank you.

Thanks, Neal.

Thank you. And your next question comes from the line of Gabe Daoud from Cowen. Please go ahead.

Thanks. Hey, guys. Good morning. Thanks for taking my questions. With something first, I could start with CapEx, a couple of items I wanted to ask about. I guess first is just the level of facility spend of four I guess it is about $400 million on an absolute basis. Just curious if that is a good number to use annually on a go-forward basis. And then your D&C per foot numbers targeting $7.50 a foot. Are you there now? Or is that a level that you expect to get to at some point this year?

Cool. Great questions. Facilities, yeah, I think kind of right around $400 million, maybe slightly above that is kind of where we think we will be this year. That is $100 million off of where we were last year. If you remember, there was a kind of a lot of one-time spend associated with the Earthstone integration. So I think $400 million is probably the right call it, short to mid-term run rate. Obviously, acquisitions can move that around. I do think that, you know, we did not do any acquisitions and just continue to prosecute developing our own inventory, then once you get call it, three plus four years out, could see that drop further to kind of call it to maybe all as low as $300 million a year, but that is probably the right kind of base case no acquisition run rate, and I think based on our history, there is likely to be some acquisitions that happen between now and then. And then the D&C side, $7.50 a foot is cutting edge real-time cost today. So we are there. You know, we were as we were looking at kind of what to put in the budget and the guide, I say we have got confidence based on what we are seeing real-time in the field today that $7.50 is achievable, and we are there today.

Awesome. Okay. So I think it would be fair to say you could probably move that lower as we move throughout the year.

Yeah. You said that not me. I you know, I think this I trust my team will continue to find ways to get better, but at the same time, I kind of you know, it feels like we have squeezed probably a lot if we can out of the deflation side of the equation. People are talking about tariffs. There is kind of a lot of other factors at play. So I think $7.50 is the right guide based on where I stand today, and hopefully, we can go find ways to cut costs from here, but it is not quite as clear as it you know, maybe it was. A few minutes ago.

Okay. Okay. No. That is fair. Understood. Thanks for that. And then just a quick follow-up. Is it fair to assume just given pretty static level of equipment and activity relative to where you just were. So maybe no real lumpiness in the program this year. Is that a fair statement?

I think there is a little bit of lumpiness. I would say CapEx is probably slightly front-half weighted, and production is slightly back-half weighted. Something like that. You know, production is probably on the low end of the guide for the first half of the year, and then high end of the guide for the back half of the year and CapEx, you probably could, you know, move a couple percent to the first half and drop the back half by a couple percent, something like that.

Gotcha. Gotcha. Okay. Nothing too meaningful, though. Okay. Great. Thanks, guys.

Yep.

Thank you. And your next question comes from the line of

Good morning, guys. Just to follow-up on some of the other questions on D&C cost. You are at $7.50 a foot now. That is down over $100 a foot from where you were coming into 2024. Can you just detail, you know, what the drivers and those reduction in D&C costs have been over the last year? How much of that efficiency gains versus on the cost side?

Yeah. Happy to do it. I would say just real high level, I would say probably slightly over 50%, maybe 55% is going to come from the efficiency side with the balance being more kind of real per unit cost deflation. On the efficiency side, it is drilling weighted. You can see it kind of however you want to pull our drilling times just we have continued to cut days and days and days on both the Delaware Basin and Midland Basin side of the equation, and we have talked about this a lot, but on the drilling side days, directly affect dollars, you know, spread rate, call it $900,000 a day every time save about that much on a gross basis per well. On the material side, it is really just kind of tangible stuff, like, stands come down, casings come down, and then a little bit of call it, like, deflation on true services. SimulFract helped a little bit. We kind of add all that together and you just get to the numbers you are quoting.

Got it. Thanks for that. And then maybe just an update on the Midland asset and how that fits into the portfolio. And seems like it is about 5% of turn in lines this year, but how are you thinking about that asset fitting into the portfolio over the longer term?

Kevin, I think, you know, we are obviously very focused on the Delaware Basin. That is kind of our backyard. That is where we have spent the majority of our time and more majority managing the majority of our capital. That has turned out to be a good little asset. You know, I think our team has done a really good job bringing kind of cost in line with the leading operators in the Midland Basin. You know, frankly, when we acquired that asset a couple of years ago, it was in a fine position, but I think our team has really taken that and made it a lot better, kind of applied the Permian Resources Corporation secret sauce if you will. I think you know, it is not an area of focus for us, but I think it fits well in the portfolio today. It is a little bit of our capital activity. It provides a nice little cash flow stream and you know, I think over the longer term, you know, if there is something to do to optimize the position that included that, I think we would obviously be open to it, but we like having the portfolio. I think it has got really good gas price optionality. Obviously, kind of Permian gas prices have not made me that excited about, but that business has a real amount of leverage to kind of end basin gas pricing that I think plus kind of makes it more attractive to hold and probably requires a different environment to do something with. But tell you the truth, our team has done such good work. I think we are pretty happy with it. Sitting where it is, and if there is a way to do something to make it or make our business better. Obviously, that is what we do every day. We would be open to it, but happy with it in the portfolio as it stands today.

Got it. Thanks, guys.

Thank you. And your next question comes from the line of Kevin McCurdy from Pickering Energy Partners. Please go ahead.

Hi, guys. It looks like you are taking your efficiency gains and shorter cycle times from 2024 and using it to increase turning lines year over year. This is slightly different than some of your peers who I think are banking those efficiency gains and keeping production flattish. I wonder if we could just share your thought process on activity levels and how you reached the decision you did.

Oh, at the beginning of it, I would say kind of what first of all, we look at as we are making capital allocation decisions, especially with respect to the drilling program, is just that is the all-in return of the program and we have talked about this in the past, but also kind of the payback of it. You know, when you add an incremental rig, how fast that rig pays for itself to where you are in a net better cash position because of it, and I think what you have seen over the last nine months or twelve months is commodity prices have moved against us but at the same time, our cost structure has more than offset it, and we have we are earning better returns at the pad level today than we had than we were a year ago just given the overall return profile of the business really with the cost structure being the biggest tailwind. I think as we look at the plan for 2025, I would not I would call this more of a tweener program like we are from, you know, year over year, it is 8% growth, but there is a lot of acquisitions in it you know, kind of from Q4 levels, it is less than that. And you know, we could easily dial it up to show meaningful growth much more than this to kind of high end 10% as we have talked about or dial it back a little bit, but it feels like kind of the return profile of the business justifies a little bit of growth, and that is where we landed. And really the way we are thinking about it and the way we focus on the thing is per share growth. I think we have got the debt-adjusted per share growth in the deck of 11% year over year, which I think feels really healthy. So I think kind of our focus, like we talked about a lot, is on the per share metric. We feel like that kind of fits with the position of our business today and the macro environment.

Thanks. I appreciate that answer. And, yeah, I think the growth certainly separates you from your peers. A follow-up, I wanted to touch on the minimal cash taxes in 2025 because I think that is a meaningful piece of the free cash flow. How are you guys able to mitigate taxes again this year and do you have any thoughts on how long you can kind of continue to defer the majority of your cash taxes?

Yeah. Hey. This is Guy. So for 2024 really just kind of continue to optimize our tax planning and we learned a lot with Earthstone that ultimately resulted in nominal cash taxes paid in 2024 and 2025 is just a carryover of that what I call, improved planning and probably optimization of Earthstone. You know, as we go forward, cash taxes will be more meaningful in 2026 and, you know, by 2027, you are closer to a full cash taxpayer. So we are going through all that now. So that will change, but 2025 was a meaningful improvement, you know, relative to what we thought six or nine months ago.

Appreciate that. Thank you, guys.

Thank you. Your next question comes from the line of Derrick Whitfield from Stifel. Please go ahead.

Good morning, all, and thanks for taking my questions. Over the last two quarters, you guys added 2,500 net acres via grassroots leasing with the majority of that coming in Q4. Kind of looking forward across your expanded position, is it reasonable to think that you could continue to add 5,000 to 10,000 acres per year via grassroots leasing? Really negating the need for larger bulk homes.

High end of that sounds pretty high. I think we are confident. Like, we have been doing this a long time and it is lumpy. I think we could have you know, replicate what we did in Q4, a couple of quarters in a full year period, but I think probably to kind of 4,000, 5,000, 6,000 net acres is probably the better base case. I would say 10,000 acres would be a really good year. You know, I think just kind of the way that these deals come through and the kind of opportunity set being largely tied to the drill bit and our drill schedule, like, do have some outsized quarters like we saw in Q4, but I think we are certainly confident we can continue doing it at the scale we have done the last couple of years, which probably close to that 5,000 acres plus or minus run rate. You know, who knows? There we go. We got an incredible team out here in Midland on the ground every day for opportunities. So I think you know, a really good year could look like that, but probably not every year.

Makes sense. And for my follow-up, I wanted to ask a capital efficiency question. One of your peers recently introduced a new measure where they evaluated the price 2025 that would allow for a similar free cash flow per share achieved in 2024. I guess with respect to that capital efficiency measure, if you have seen it, I would love your take on it. And secondly, if you have a view on what crude price would deliver a similar level of free cash flow per share for you in 2025 if you have it.

I mean, I think for us, we actually like looking at this. I think one thing that is really important as we talk about running our business, there it is that our business is getting better year over year and kind of the ultimate arbiter of quality as we see it is free cash flow per share. I think that metric that we talked about is generally in the context of absolute free cash flow, but I think from our perspective, if we were trying to generate the same, call it $1.4 billion we are generating free cash flow on an absolute basis, last year, which is that call it a $75 crude price. We think we could do that this year in the kind of low to mid-sixties. Call that $63 plus or minus, and feel like Darrow shows the quality of the business, the kind of step change that we have seen in operational efficiencies and capital efficiency across the board.

Great update. Thanks for your time.

Thanks, Derrick.

Thank you. And your next question comes from the line of Neil Mehta from Goldman Sachs. Please go ahead.

Good morning, Will and James and team. Thanks for the time here. Yeah. I guess big corp pick your question. You know, you show showing the deck despite multiyear outperformance, the stock does still trade at two turn discount to a lot of the peer set, including your big brother in the middle. And then I guess the question is, what do you think the market needs to better understand, to start thinking about Permian Resources Corporation, differently and more in the context of other pure play Permian stories.

You know, I think to be frank, I think you know, we do not spend a ton of time guessing what the market is thinking. You are probably closer to that and better answering that question than we are. I would say where we spend all of our total focus on is how we can make our business better. I think if I had to speculate, and I am probably not the best person to do this, I think it is a combination of one, Permian Resources Corporation is still a relatively new story. Like, I think if you want to talk about the guys across the street, they have been doing this for well over a decade, probably closer to two than to one, and doing it tremendously well year in, year out, quarter in, year in, quarter out. So I think, like, that multiple is deserved by the kind of but the quality of the business they run and the duration they run. We are still a relatively new story. I think it is two and a half year mark or so for Permian Resources Corporation, and still need a lot of investors. So hopefully, we have built a lot of trust. You have obviously you know, we have been creating a lot of value for shareholders and I think over time, the kind of multiple uplift will come as people see people see the quality of our business today but continue to see quarter in, quarter out, and year-end year out execution. So I think the only other thing we get, occasionally, from investors is know, the outperformance to date, which is shown on slide eleven, has been so strong three years running that I think people have a hard time reconciling that with slide twelve, which is still a relatively low multiple compared to the peer set. So I think it all works itself out over time and, you know, now I would say for us, we are really focused on how we grow free cash flow per share and think everything else will take itself.

Yeah. Great answer. And then just to follow-up on lateral lengths, you know, you are moving from 9,300 feet to 10,000. Just talk about you know, what how do you continue to drive this higher and, you know, what is your approach to continue to extend those laterals.

Yeah. I think this is just, you know, the way the acreage position set up this year. I think we have always Delaware Basin at least in kind of the deeper, you know, Wolfcamp type benches, targeted two-mile laterals is just kind of the optimal Delaware Basin laterally. I think some of the step up from 9,300 to 10,000 is just we are drilling very, very few sub 10,000-foot laterals as well. Or this year as well as there are a few three-mile laterals that in some of the shallower benches actually does drive incremental economics, and when so, that is what we will do. I think if the verdict is still a little bit out on the Delaware Basin, if you will see the big shift change from targeting 10,000 feet to targeting closer to 12,500 feet that you have seen in the Midland Basin. I would say most Midland Basin operational synergies or efficiencies do end up translating to Delaware a couple of years later. So I probably would not bet against it, but you know, we drop we have dollar based on productivity makes a lot more fluid per foot than Midland. So at some point, if you really, really start to push lateral lengths, your, you know, fluid deliverability is constrained, and it kind of hurts the economics. So I would say that is the stuff we are looking at every day, but I do have the confidence that our drilling team could easily go drill two and a half, three miles if needed. It is more of just that that makes sense of the acre's position the economics.

Okay. Thanks, Will.

Thank you. And your next question comes from the line of Oliver Huang from TD. Please go ahead.

Good morning, James, Will and team, and thanks for taking the questions. Just wanted to kind of look back at the 2025 budget and the non-D&C portion, that 20%. It sounds like most of that is facilities, infrastructure, related, but just any sort of color you all can provide with respect to the magnitude of the non-op CapEx within that budget.

Not off is pretty small. We have done an awesome job over the years I think, kind of coring up and focusing on our operated business. I would say it is, you know, the knowledge spends less than $50 million a year.

Okay. That makes sense. And for a follow-up, maybe just on gas realizations. Last quarter, you all put out a slide speaking towards focusing on optimizing the gas netbacks. Just kind of wondering if there has been any progress updates to kind of up on that front that you are able to speak to.

No. I mean, I would say it is definitely still a priority. I think kind of better marketing of all of our hydrocarbons across the board is a priority, I would say, on the gas side. That just takes time. You know, I think you saw us on the crude side kind of guide up our oil realizations by a percent at the midpoint from our guidance last year, and I think we have made some real progress there, ten, twenty, fifty cents a barrel in different places really moves the needle on free cash flow at the end of the day. On the gas side, I think, you know, to be frank, I think our way we are going to sell our gas this year probably looks a lot like it did last year. I think the kind of real step change that we think we will see is probably in 2026 and beyond as we are looking at some longer-term, longer-haul deals, ways to access. Got a couple of different things on the plate that could allow us to access different markets than Waha, but that just takes time. So, you know, I think our gas strategy is very in focus for us. I think kind of optimizing our realizations over the next decade is at the very top of the strategic priorities list, but you will see that more in 2026 and 2027 than you will in 2025.

Perfect. Thanks for the time.

Thank you. And your next question comes from the line of Josh Silverstein from UBS. Please go ahead.

Good. Thanks. Good morning, guys. Mentioned potentially getting the balance sheet to half a turn of leverage by the end of this year. Do you see benefit in getting to this level from a rerating in the stock, or does it make sense to stay closer to one times and use that cash for buyback and acquisitions?

You know, we are definitely not kind of solving for balance sheet issues because I think because of implications for how the stock trades. I would say as you think about balance sheet, it is positioning our business to, you know, optimize value creation in all environments, and I think having a stronger balance sheet, I think everyone would agree positions you well to be able to be opportunistic and aggressive if there is a downturn and you have dry powder as well if the right opportunity comes along. Be that a buyback, be that an acquisition, and a kind of normal market as well. So I do not think it is a stock positioning. I said we are very comfortable at one times. We have been at one times the majority of our business life cycle the last nine or ten years. And during an unfortunate position where the business is generating so much cash, it is going to delever more quickly this year absent any, you know, extra acquisitions or buybacks, but there is certainly no, you know, strong view that we are going to trade better at 0.5 times than one times.

Got it. And then on the royalty side, you guys have a pretty chunky position now, almost 90,000 net royalty acres, you know, targeting more royalty acreage? And then a couple of questions here. Just as you are thinking about M&A, are you thinking about potentially the drilling program this year, how much drilling is on that royalty acreage to enhance returns?

Yeah. I think look, we I say we look at all acquisitions on the lens of what is the all-in total return we think we can achieve and you know, I would say the majority of the acquisition dollars we spent have been on working interest. You know, I think we look at a lot of royalties deals. That is a pretty competitive landscaping, competitive market where it is often perceived lower cost of capital, but I think we are definitely active buying royalties under the Permian Resources Corporation where we can. I think where we have had the most success is buying working interest packages that come with royalties alongside it. You know, I think that has been you saw that in the Berea Draw deal, and we announced last year and kind of I think probably more likely to be the base case and then, you know, when it comes to activity, you know, I would say the activity goes towards the highest rate of return development that we have and, you know, more often than not, those tend to be on the high enterprise package that we have with the kind of royalties advantage. See on fifteen, our kind of 2025 guidance has us at about a 79% eight eight in our eyes, so we are definitely allocating more capital to those higher return, high NRI packages.

Sounds good. Thanks, guys.

Thank you. And your next question comes from the line of John Abbott from Wolfe Research. Please go ahead.

Hey, good morning and thank you for taking our questions. Well, I want to go back to the cost per lateral foot. Ignoring tariffs, you mentioned the bits there, you know, it is $750 per lateral foot. To achieve further efficiencies from here, do we really need to see more of a technological change at this point in time or are there other things that you could potentially do? Fifty a major change of cost.

Yeah. Look, I mean, if I was to make the bull case for cutting costs from here, I would say you know, there are small changes in continued kind of reduced flat time on the drilling side. There are small changes on water sourcing, you know, recycled water is a meaningful savings, and water has become a really, really big part of our capital budget. On the completion side, you know, and then, yeah, there are always the breakthroughs. Like, if you follow drilling cost, for Permian Resources Corporation or the predecessor company that we ran over time, it is kind of a flat to very marginal improvements quarter over quarter, and then you have big step changes once every year or two. We saw one of those going from Q1 to Q2 last year. So I see those are more of the technological changes. So you discover a new BHA, or you find a swap out of fluids or something like that that has, like, a meaningful change. So those are all the ways you could win. You know, obviously, there are ways you can lose too, and so hence the $750 being kind of where we landed for the year.

Okay. And then I want to go back to CapEx production. I mean, production is 8% year over year. So you know, we got it back to date as well, Kerr. But there are benefits to maintaining efficiencies of operation. I mean, we have seen that in your cost per lateral foot. So when you think about sort of possibly managing production, or, like, when you think about, like, a production number, does it make more sense to let efficiencies continue versus managing to a production number?

I think it just really depends on the market and kind of I would say both. It is a combination as we think about kind of capital allocation and reinvestment rate which ultimately drives kind of the production number that you referenced. It is a function as we think about it of what are the returns that we are getting and what is the kind of macro backdrop go forward? I think the returns we are getting even at evaporated strip, are phenomenal in this environment. You know, I think we talked about you know, our returns at a corporate level are materially better than they were last year at even a lower oil price. But I do think kind of there is a backdrop of kind of potentially an oversupply market as you kind of move through the year. I think maybe some of the storm clouds are deciding a little bit, but I think with that backdrop, we kind of got to what we viewed as a middle ground on kind of organic growth, call it kind of low to mid-single digits on an organic basis, an 8% overall. We are really focused on is a per share growth and I think I cannot talk about that enough. That kind of per debt-adjusted share are 11% of our production growth feels really good for the business in this market, and I think you will see us talk a lot more about that metric going forward.

Appreciate it. Thank you for taking our questions.

Thank you.

Thank you. And your next question comes from the line of Leo Mariani from Roth Capital Partners. Please go ahead.

Yeah. Hi. Obviously, you spoke a bit, in your prepared comments about, you know, clearly the multiple being lower, you know, than peers and hopefully that takes care of itself over time. But at the same time, you guys are generating a lot of free cash flow, which seems to put the balance sheet in a lot better shape at the end of the year, and I know M&A is unpredictable. But, you know, just given the fact that you know, your leverage profile is in great shape and the multiple is low, you know, why does it make sense to maybe feather in a little bit more buyback instead of kind of waiting for things to totally blow up here?

Yeah. I mean, I think for us, we have always talked about our buyback strategy is going to be very call it rifle shot and we think you are going to get a better bang for your buck on buyback dollars when you see real dislocations or a real downturn. And although I think we are undervalued relative to peers, it does not feel like a truly dislocated market kind of more broadly today. So I think we think our dollars are better spent putting them on the balance sheet and waiting for a call it a riper opportunity, then one that is just good enough. We think that kind of prudent approach to share buybacks to ultimately drive more shareholder value as a long term, and we are kind of prepared to be patient and wait for the right opportunity to be that a juicer buyback in the future that I think we do in mass or an acquisition opportunity or something else.

Okay. And then just trying to your controllable cash cost as you pointed out, they kicked down a little bit here in the fourth quarter. You are looking at 2025 guidance. I guess you guys are expecting in the to come down again, on your controllable cash cost. Maybe just kind of talk to some of the success you had in Q4 and what the drivers are to kind of reduce the cost more, in 2025? Is it just simply a matter of scale, or are there some kind of tangible cost reduction efforts that you guys are working on?

Yeah. So, you know, I would say one big win that which we highlight some of is the cost we were able to cut so quickly out of the acquisitions we made. You know, that free address that we bought was north of a $10 per BOE asset, and you know, just a few months after getting our hands on it, we have got it down into the eight, and I think there is room to continue to lower it from there. So if you have some of those tailwinds as you compare Q4 to kind of forward-looking 2025. We also have just kind of the way our development program sets up relative to some of our midstream contracts, I think you will expect at least like the lower GPMT year over year. That is more just a function of where we are drilling than any material change to the business, but look. I would say overall, we think controllable cash cost is important to protecting our margin, to protecting our ability to generate free cash flow, and free cash flow per share. So we will keep chipping away at it. You know, industry-leading G&A, kind of keep pushing on the LOE side, etcetera, etcetera, will lead to a better business and ultimately more free cash flow.

Thank you.

Thank you. And your next question comes from the line of Paul Diamond from Citi. Please go ahead.

Good morning. I was just taking my call. I just a quick one. You mentioned on M&A opportunities, kind of thinking that couple hundred million dollar range. You should be thinking about, you know, the go-forward kind of opportunity set similar to Berea Draw or, you know, on the high side or the low side of that?

You know, I think we are doing acquisitions today that are $50,000 on the small end and we are doing those by the dozen or by the hundreds, and I think we have done a lot of the kind of Berea Draw size, high hundred million dollar. Last year, we did the kind of $800 million Berea Draw deal. We did a got a $200 something million deal in Eddy County, and then a couple of deals a little smaller than that. So I think that is probably the right range of kind of potential outcomes. I think it is kind of big as a billion dollars on the kind of cash transaction side and as small as $10,000.

Understood. Appreciate the clarity. And then just talking a bit about the ground game. You are compared to, like, two and a half years ago with the CDAV, Colgate merger, how have you seen that evolve? Are you getting seen similar a bit ask spreads, similar kind of negotiation times? Do you have any evolution in that market or activity?

You know, the ground game has been pretty similar to efforts that we have had underway since we started the predecessor company Colgate back in 2015, and I think a big part of that is the relationships and being boots on the ground out here in Midland and the heart of the Permian that kind of opens up a lot of opportunities for us, but I would say the only big change we saw was from the Colgate's continual merger in 2022 was just the scale of the business. You know, we go from running four, five, six rigs to running twelve rigs, and that kind of doubles the opportunity set and probably doubled our kind of negotiate times, rate of return, cost break has been pretty steady for a long time.

Understood. Thanks for the clarity. I will leave it there.

Thank you. And your next question comes from the line of Noah Hungness from Bank of America. Please go ahead.

For my first question, I just wanted to ask on the base dividend. You guys have continued to have your capital costs your capital program become more efficient, your cash cost go lower, and your production is higher than what we were expecting. And it seems like your free cash flow capacity is also increasing. So what was your reasoning behind keeping your base dividend flat when you announced results?

Yeah. And the reason is we paid our we all got our first $0.15 base dividend in November. So it just kind of felt like they are kind of that was the right status quo. And I think we probably messaged this indirectly when we rolled it out that kind of we do plan to revisit it annually, but we kind of did our annual revisit with the first November dividend that we paid. I think the business could certainly support a larger dividend, and we are excited to kind of revisit it this time next year and should have a nice increase, but I would say it just felt like we had just done this and, you know, frankly, the dividend yield is higher than it was when we rolled it out, and it had only been one quarter. So pretty simple thinking that just kind of did not seem like it made sense to make a change just one quarter end.

Yeah. That makes sense. And then I just would like to know your thoughts on potentially implementing creative drilling solutions like u laterals. We have seen some of your peers in the basin do so to levels of success and if you guys had any thoughts on that.

Yeah. So I think for the most part, we are very fortunate that our kind of land team and our land position does not require it. Like, if you go look at alright. Could you on a map just a simple scan, you can see how well it sets up for kind of two or longer than two straight well development. Having said that, I think we have drilled three or four u-turn wells or kind of curved candy cane wells, if that is what you want to call it, to date. And anytime it does make sense, it is part of the program. I would say our drilling team has proven over the three or four times we have done it that there is very, very little incremental cost. Like, with that curve, you know, sometimes you do not even see it on a DVD plot. And so we have the confidence that when it makes sense, we will do it. And I think that, you know, it will be something kind of like SimulFract. It is part of the program, but I do not think it will be something that we are necessarily highlighting is a huge step change in capital efficiency primarily driven that we just do not have that many inefficient places where we need to do it.

Gotcha. Thank you so much for answering our questions.

Hey, you bet. Thanks, Noah.

Thank you. There are no further questions at this time. I will now hand the call back to Mr. James Walter for any closing remarks.

Thank you, and thanks everyone for dialing in today. Have you got gotten off to a great start for 2025, our primary goal remains the same. Maximize shareholder value in the long term. Do that, we plan to continue to build on our track record of delivering consistent results with the lowest cost structure in the Delaware Basin. Again to everyone for joining the call today and for following the Permian Resources Corporation story.