Business context and reporting period
This is an unaudited Form 10-Q for the three months ended March 31, 2022. Important entity mismatch: although the request identifies Permian Resources Corp, the filing is for Centennial Resource Development, Inc. (ticker CDEV), an independent Delaware Basin oil and gas producer. Confirm that this is the intended filing.
Financial and operating performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Oil and gas sales | $347.3 million | $192.4 million |
| Income (loss) from operations | $165.1 million | $34.0 million |
| Net income (loss) | $15.8 million | $(34.6) million |
| Basic / diluted EPS | $0.06 / $0.05 | $(0.12) / $(0.12) |
| Cash provided by operating activities | $160.1 million | $72.3 million |
| Cash used in investing activities | $84.1 million | $46.6 million |
| Cash used in financing activities | $34.8 million | $20.6 million |
Sales rose 81%, reflecting higher realized commodity prices and 13% higher total net production, averaging 61,359 Boe/d. Oil, natural gas and NGL production increased 16%, 6% and 18%, respectively. Realized oil price was $89.17/Bbl before hedge settlements and $76.35/Bbl after settlements; natural gas was $3.93/Mcf before and $3.42/Mcf after settlements.
Operating expenses were $182.2 million versus $158.4 million. DD&A was $71.0 million ($12.86/Boe); lease operating expense was $5.20/Boe and gathering, processing and transportation expense was $3.96/Boe. Interest expense declined to $13.2 million from $17.5 million. A $129.5 million derivative loss, including $86.6 million of noncash mark-to-market loss and $42.9 million of realized settlement losses, substantially reduced reported earnings.
Balance sheet, debt and liquidity
At March 31, cash and cash equivalents were $50.6 million, total assets $4.0 billion, and long-term debt, net, $801.2 million. The company had no revolving-credit borrowings and reported $744.2 million of available capacity, net of letters of credit. It reported compliance with credit-facility financial ratios and debt covenants.
Operating cash flow funded $81.2 million of drilling and development cash expenditures and repayment of $25.0 million of net revolver borrowings. Total Q1 capital expenditures incurred were $114.7 million; accrued capital expenditures included in payables were $63.5 million. Current derivative liabilities were $117.7 million.
Material changes, outlook and risks
- The February 2022 refinancing extended the secured revolving facility maturity to February 2027, raised elected commitments to $750 million and the borrowing base to $1.15 billion.
- Management planned to maintain a two-rig program for the rest of 2022 and forecast full-year capital expenditures of $365 million to $425 million, including $350 million to $400 million for drilling, completion and facilities. Management expected to fund the program from operating cash flow, and anticipated continued free cash flow based on then-current commodity prices and hedge positions.
- The board authorized up to $350 million of share repurchases through April 1, 2024; none were made in Q1. Repurchases are subject to liquidity, market conditions and debt-agreement restrictions.
- Management cited commodity-price volatility, inflation and rising oilfield costs, supply-chain constraints, geopolitical events, regulatory and weather risks, and potential effects of lower prices on cash flow, reserves, borrowing base and covenant compliance. The filing reported no significant operational disruptions from COVID-19.
- A dispute with a transportation provider related to Winter Storm Uri created a reasonably possible loss estimated at $0 to $7.6 million; the filing stated no amount within that range was a better estimate. A two-year frac-sand take-or-pay agreement carries a $44.6 million minimum commitment.
- Q1 oil and gas prices were elevated amid supply-demand imbalances and the Russia-Ukraine conflict. Commodity hedges mitigate some downside but also limit gains; hedge fair-value movements can cause significant earnings volatility.
Key facts for investors to verify
- Verify issuer and ticker: the supplied filing is Centennial Resource Development, Inc. (CDEV), not Permian Resources Corp.
- Review production, realized prices after hedging, and the extent to which reported earnings and cash flow depend on commodity prices and working-capital timing.
- Assess the $801.2 million debt balance, revolver availability, covenant terms and refinancing/borrowing-base exposure.
- Compare the $365 million to $425 million capital-spending outlook with actual cash generation and the company’s stated repurchase plans.
- Monitor derivative settlements and mark-to-market exposure, the transportation litigation, and the frac-sand purchase commitment.