01—Abstract
Summary
Summary of the 10-K filed February 24, 2023. Cited figures are marked; the original filing is the authoritative source.
Permian Resources Corporation (NYSE: PR) reported its 2022 annual results following its September 1, 2022 merger with Colgate Energy Partners III, LLC (Colgate).
Oil and gas sales rose to $2,131.3 milliona in 2022 from $1,029.9 million in 2021, driven by net production of 34,934 MBoe (up 57%) and an average oil price of $88.95 per Bbl. Net income attributable to Class A Common Stock was $515.0 million, or $1.61 per diluted share, compared with $138.2 million in 2021. Total proved reserves rose to 582,146 MBoe at December 31, 2022, from 305,204 MBoe, with 41% classified as proved undeveloped, and the pre-tax PV 10% of proved reserves was $11.7 billion.
The Merger added scale and reserves, and Colgate holders received 269.3 million Class C shares and Common Units representing approximately 48% noncontrolling interest in the operating subsidiary, Permian Resources Operating, LLC (OpCo). Total long-term debt, net, was $2,140.8 millionb at year-end, with $385.0 million borrowed under the credit facility, and the Company reported $1.4 billion of operating cash flow. Capital expenditures for 2023 are budgeted at $1.1 billion to $1.2 billion, to be funded from operating cash flow, and the Company plans a variable return program beginning in the second quarter of 2023 that will distribute at least 50% of free cash flow after the base dividend.
Key risks include commodity price volatility, reliance on a small number of purchasers (BP America at 34%c of 2022 net revenues), a concentration of all proved reserves in the Delaware Basin, and substantial leverage. Integration of Colgate's controls is ongoing, and management excluded Colgate from its internal control assessment as of December 31, 2022.
02—Key points
Key Highlights
- Oil and gas sales of $2,131.3 million in 2022, up from $1,029.9 million in 2021, with net production of 34,934 MBoe.
- Net income attributable to Class A Common Stock of $515.0 million ($1.61 diluted EPS) versus $138.2 million in 2021.
- Total proved reserves of 582,146 MBoe at December 31, 2022, up from 305,204 MBoe; pre-tax PV 10% of $11.7 billion.
- Merger with Colgate completed September 1, 2022; 269.3 million Class C shares issued, representing about 48% noncontrolling interest in OpCo, and $525 million in cash consideration.
- Total long-term debt, net, of $2,140.8 million; $385.0 million drawn on the credit facility with $1.1 billion of available borrowing capacity.
- 2023 drilling, completion and facilities capex budget of $1.1 billion to $1.2 billion, expected to be funded entirely from cash flows from operations.
- Capital return plan: base dividend of $0.05 per share plus a variable return program distributing at least 50% of free cash flow, starting in Q2 2023; $500 million repurchase program authorized.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 24, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $2.13B$1.03B | +106.9% |
| Operating Expenses | $1.12B$699.42M | +60.5% |
| Operating Income | $1.01B$370.62M | +171.9% |
| Interest Expense | $95.64M$61.29M | +56.1% |
| Net Income | $515.04M$138.18M | +272.7% |
| EPS (Basic) | $1.80$0.49 | +267.3% |
| EPS (Diluted) | $1.61$0.46 | +250.0% |
| Shares Outstanding (Basic) | 286.16M280.87M | +1.9% |
| Shares Outstanding (Diluted) | 322.82M310.17M | +4.1% |
05—Questions
Frequently Asked Questions
How did the Colgate Merger change Permian Resources' ownership structure?
Colgate's equity holders received 269,300,000 shares of Class C Common Stock and an equal number of Common Units in OpCo, together representing approximately 48% of the outstanding shares and a noncontrolling interest in OpCo. Holders can exchange their units for Class A shares on a one-for-one basis, and these exchanges are not permitted until March 1, 2023, subject to customary exceptions.
How concentrated are the Company's customers and operating area?
In 2022, BP America accounted for 34% of total net revenues, Shell Trading (US) Company for 21%, and Enterprise Crude Oil, LLC for 18%. All of the Company's total estimated proved reserves at December 31, 2022 are located in the Delaware Basin, primarily in West Texas and New Mexico.
What is the Company's debt position and liquidity?
At December 31, 2022, the Company had $385.0 million borrowed under its Credit Agreement, with $1.1 billion of available borrowing capacity after $5.8 million of letters of credit. Senior notes totaled $1.8 billion, and the Company stated it was in compliance with its financial covenants as of year-end. Total long-term debt, net, was $2,140.8 million.
What are the Company's plans for returning capital to shareholders?
The Company plans a base dividend plus a variable return program that distributes at least 50% of free cash flow after the base dividend, through variable dividends, share repurchases or both, beginning in the second quarter of 2023 based on first-quarter 2023 results. A $0.05 per share dividend was declared in November 2022 and another quarterly dividend of $0.05 was declared on February 22, 2023. The $500 million repurchase program had no purchases during 2022.
What drove the increase in operating costs in 2022?
Lease operating expenses rose $65.4 million to $171.9 million, mainly due to costs associated with 309 gross operated horizontal wells acquired in the Merger. Severance and ad valorem taxes increased $88.6 million to $155.7 million, reflecting higher revenues and higher assessments, and the Company noted that severance and ad valorem taxes were 7.3% of revenue. Merger and integration expense was $77.4 million.
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