Permian Resources Corporation — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a stand-alone fourth-quarter report; the filing does not provide a clear set of Q4-only financial results. Permian Resources is a Permian Basin oil and gas producer operating primarily in West Texas and New Mexico.
Business context and reporting period
The November 1, 2023 Earthstone merger materially expanded the company. Permian Resources issued approximately 210.7 million Class A and Class C shares, with merger consideration valued at approximately $2.9 billion, and assumed Earthstone debt. Earthstone’s results are included only from the merger closing date, limiting comparability with 2022. At year-end, the company reported approximately 407,000 net leasehold acres and 68,000 net royalty acres.
Key financial and operating metrics
| Metric | FY2023 | FY2022 |
|---|---|---|
| Oil and gas sales | $3.121 billion | $2.131 billion |
| Net production | 194,499 Boe/d average | 95,708 Boe/d average |
| Income from operations | $1.097 billion | $1.008 billion |
| Net income | $879.7 million | $749.8 million |
| Net income attributable to Class A common stock | $476.3 million | $515.0 million |
| Basic / diluted earnings per Class A share | $1.36 / $1.24 | $1.80 / $1.61 |
| Cash from operating activities | $2.213 billion | $1.372 billion |
| Drilling and development cash expenditures | $1.525 billion | $771.6 million |
Revenue rose 46% and average production more than doubled, largely reflecting acquisitions and new wells. Lower realized commodity prices offset some volume growth: oil price excluding hedge effects fell 15% to $75.84/Bbl; natural gas fell 67% to $1.60/Mcf; and NGLs fell 37% to $22.83/Bbl. Realized oil and gas prices including derivative settlements were $77.65/Bbl and $1.89/Mcf, respectively.
Income from operations was about 35% of sales, versus about 47% in 2022. DD&A increased to $1.008 billion from $444.7 million, while merger and integration expense rose to $125.3 million from $77.4 million. Interest expense increased to $177.2 million from $95.6 million. Derivatives generated a $114.0 million net gain in 2023, versus a $42.4 million loss in 2022. The filing reports no impairment of proved oil and gas properties; impairment and abandonment expense was $6.7 million.
Cash flow and liquidity: Operating cash flow less drilling and development cash expenditures was approximately $688.6 million, calculated from the reported amounts. Year-end cash was $73.3 million. Current assets were $650.4 million and current liabilities $1.242 billion. The company had no revolver borrowings and reported $2.0 billion of available capacity, net of $5.7 million in letters of credit, under its $2.0 billion elected commitment; the facility matures in February 2027.
Debt: Long-term debt, net, was $3.849 billion, principally senior notes, compared with $2.141 billion at year-end 2022. The company issued $1.0 billion of 7.00% senior notes due 2032, and assumed Earthstone notes including $550 million of 8.00% notes due 2027 and $500 million of 9.875% notes due 2031. It reported compliance with debt covenants at year-end.
Reserves: Proved reserves totaled 925.1 MMBoe at year-end, up from 582.1 MMBoe; 76% were proved developed. The standardized measure of discounted future net cash flows was $9.526 billion, versus $9.426 billion. Supplemental pre-tax PV-10 was $11.108 billion, down from $11.715 billion; it is a non-GAAP measure and not fair value. Reserve additions from acquisitions and drilling were partly offset by downward revisions.
Material changes versus the prior comparable period
- Production increased 103% and sales increased 46%; the Earthstone merger and the 2022 Colgate merger affect year-over-year comparability.
- Lower commodity prices reduced average realized prices across oil, gas and NGLs, while higher volumes lifted total sales.
- Operating cash flow increased $841.8 million, but development spending also increased substantially.
- Net income increased, but income attributable to Class A shareholders and per-share earnings declined, reflecting, among other factors, noncontrolling interests and a larger share base.
- Proved developed reserves increased to 704.0 MMBoe; total PUD reserves declined to 221.1 MMBoe after conversions, revisions and additions from acquired properties.
Outlook, management commentary, risks and unusual items
- Management budgeted 2024 drilling, completion and facilities cash capital expenditures of $1.9–$2.1 billion and expected to fund them entirely from operating cash flow, based on anticipated production, commodity prices and hedge positions. This is an expectation, not a guarantee.
- The company targets disciplined production growth, sustainable free cash flow, a flexible balance sheet and shareholder returns. Its variable-return framework aims to distribute at least 50% of free cash flow after the base dividend through variable dividends, repurchases, or both; board approval and debt restrictions apply. A February 2024 dividend announcement set total base and variable return at $0.15 per share or unit.
- Management cited commodity-price volatility, inflation and oilfield cost pressures. Other material exposures include Permian concentration, reliance on third-party transport and a limited number of purchasers, water sourcing and produced-water disposal, regulatory and climate-related requirements, and execution and integration risks from Earthstone.
- Earthstone contributed $337.3 million of revenue and $211.8 million of direct operating expenses from November 1 through year-end. 2023 merger and integration expense included $106.9 million related to Earthstone; the full-year expense also included Colgate-related costs.
- The company disclosed a Winter Storm Uri transportation dispute with a reasonably possible loss estimated at $0–$7.6 million, potentially plus interest. It reported no material environmental claims known to be unprovided for at year-end.
- KPMG issued unqualified opinions on the financial statements and internal control over financial reporting. The auditor’s control assessment excluded Earthstone, representing 39% of consolidated assets and 11% of 2023 revenue; integration of Earthstone controls was ongoing.
Most important facts for investors to verify
- How much of the production, revenue and cash-flow growth is attributable to acquired assets versus organic performance, and how the combined business performs after integration.
- Whether the 2024 capital budget and shareholder-return plans remain supportable under actual commodity prices, hedge settlements, costs and operating cash flow.
- Debt maturities, interest burden, covenant headroom and the availability of the revolver after borrowing-base redeterminations.
- Reserve assumptions and revisions, including PUD development timing, reserve replacement and the sensitivity of reserve values to commodity prices.
- Resolution and potential cost of the Uri transportation dispute, minimum-volume and purchase commitments, and produced-water disposal or regulatory developments.