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spk10: Please stand by, we're about to begin. Good morning and welcome everyone to Permian Resources conference call to discuss its first quarter 2024 earnings conference call. Today's call is being recorded. A replay of the call will be accessible until May 22nd, 2024 by dialing 1-800-938-2488 and entering the replay access code 24995 or by visiting the company's website at www.permianres.com. At this time, I will turn the call over to Mr. Hayes Mabry, Permian Resources Vice President of Investor Relations, for some opening remarks. Please go ahead, Mr. Mabry.
spk07: Thanks, Beau, and thank you all for joining us on the company's first quarter 2024. On the call today are Will Hickey and James Walter. our Chief Executive Officers, and Guy Oliphant, our Chief Financial Officer. Yesterday, May 7th, we filed a Form 8K with an earnings release reporting first quarter results. We also posted an earnings presentation to our website that we will reference during today's call. I would like to note that many of the comments during this earnings call are forward-looking statements that involve risk and uncertainties that could affect our actual results and plans. Many of these risks are beyond our control and are discussed in more detail in the risk factors and the forward-looking statement sections of our filings with the SEC, including our Form 10-Q, which is expected to be filed later this afternoon. Although we believe the expectations expressed are based on reasonable assumptions, they are not guarantees of future performance, and actual results or developments may differ materially. We may also refer to non-GAAP financial measures that help facilitate comparisons across periods and with our peers. For any non-GAAP measure we use, a reconciliation to the nearest corresponding GAAP measure can be found in our earnings release or presentation, which are both available on our website. With that, I will turn the call over to Will Hickey, co-CEO.
spk05: Thanks, Hayes. I truly believe that the first quarter was the most compelling quarter Permian Resources has delivered so far. We were able to deliver production and free cash flow above our expectations, close out the integration of Earthstone ahead of schedule while increasing our annual synergy target by 50 million, and continue to execute on a creative A&D, with approximately 270 million of acquisitions announced this year. It takes an incredible team to deliver such strong execution quarter after quarter, and I look forward to sharing some more detail on Q1 today. Moving into quarterly results, I'm pleased to announce Q1 production exceeded expectations with total production of 320,000 barrels of oil equivalent per day and oil production of 152,000 barrels of oil per day. Our strong production was attributable to multiple factors, including accelerated earthstone DMC efficiencies and higher operational runtimes. Strong production results in capex of $520 million in the quarter resulted in adjusted operating cash flow of $844 million or $1.09 per share and adjusted free cash flow of $324 million or $0.42 per share. We remain highly focused on sustaining a strong balance sheet with leverage of approximately one times and increased liquidity to over $2 billion. As part of our regularly scheduled spring bank redetermination process, we increased aggregate lender commitments under the credit facility from $2 to $2.5 billion, while maintaining a borrowing base of $4 billion. Turning to return of capital, our strategy remains consistent. We delivered on our previously announced increase-based dividend of $0.06 per share, a 20% increase from previous quarters. For the variable portion of our return of capital, first, we repurchased a total of 2 million shares in the quarter. The remainder of our capital return we paid out via a variable dividend of 14 cents per share, bringing the all-in quarterly return of capital to 24 cents per share. Now I'd like to spend a little time talking about the efficiencies and synergies that impacted the business in such a positive way this quarter. When we rolled out the Earthstone acquisition, we were highly confident that we could reduce drilling days and completion days and improve production operations, driving material synergies to be fully realized by year-end 2024. We have already achieved that and more. In just under five months, we've high-graded all legacy earthstone rigs and completion crews. This, combined with PR best practices, helped drive an 18% reduction in earthstone drilling days per well and approximately 50% reduction in completion days per well in the first quarter, which we were initially anticipating achieving by mid-year 2024. Additionally, we are seeing some efficiency gains in the Midland Basin that were not originally forecasted. which is a testament to our team's ability to unlock value in new assets quickly. In addition, runtimes improved as a result of better compression performance, optimized artificial lift, and improved chemical programs. The combination of accelerated activity and better runtimes was the primary driver of the strong production performance in Q1. The impact of the combined PR team's integration execution is that we have already achieved $175 million per year of synergies and are increasing our synergy target to an annual run rate of $225 million. As I mentioned earlier, the main drivers of this increase are operational. For DC&F, we increased our per-well savings from $1.2 to $1.5 million. Similarly, we expect to be able to improve margins by approximately $1 per VOE by year-end, but we've already implemented strategies in the field to realize the majority of this improvement today. Drivers of the margin improvement include reduced trucking, upgraded electrical infrastructure, rationalizing vendors, and optimizing midstream agreements. Integrations are never easy, but what our team accomplished over the last six months is a testament to a lot of hard work and dedication, and we're proud to say that Earthstone is fully integrated. With that, I'll turn it over to James to talk to A&D and an update on our 24 plan.
spk08: Thanks, Will. I'd like to quickly reiterate what we led off with today, that PR's results this quarter are the best results we have had as a public company, and that applies to every department and every discipline at Permian Resources. This now marks our seventh consecutive quarter of strong operational execution as a public company and our ninth year as a leading operator in the Delaware Basin. We are highly focused on continuing to increase our track record of consistent results in low-cost operations. Our team is firing on all cylinders, positioning us very well for the remainder of the year. While successfully executing in the field and wrapping up the integration of Earthstone, our business development and land teams continue to source, evaluate, and close attractive deals in and around our enhanced footprint. Our overall objective when it comes to A&D is to target acquisitions that enhance the quality of our business and drive value for shareholders. For us, that means seeking out acquisitions that increase the quality and duration of our current inventory at prices that make sense. And our recent acquisitions achieve all of these goals. Yesterday after market closed, we announced two separate bolt-on transactions directly offset our legacy Parkway asset in Eddy County. This asset is characterized by low D&C costs and high oil cuts that make it one of the most capital efficient assets in our portfolio. This is why we're so excited to bolster our position here with the addition of high quality, high and high locations that immediately compete for capital. In addition to these bolt-ons, we remain highly active on the grassroots side of the business, completing approximately 150 smaller transactions ahead of the drill bed. These smaller deals target near-term development and are amongst the highest rate of return acquisitions that we find. All in, these transactions add over 11,000 net leasehold acres and approximately 110 gross operated locations for a purchase price of $270 million. of which we expect $245 million to be paid in the second quarter. After accounting for production value, this works out to a little less than $10,000 per net leasehold acre and approximately $1 million per gross location or $1.5 million per net location. Our presence in Midland has been one of the key drivers of our successful acquisition program, and the vast majority of the acres we are acquiring in today's announcement come from Midland-based counterparties who we have longstanding relationships with. As Will mentioned earlier in the call, our team's successful execution has reduced our drilling and completion times, allowing us to bring barrels forward into Q1 and increase overall production for the year. As such, we are increasing our standalone production guidance to 150,000 barrels of oil per day and 320,000 barrels of oil equivalent per day. This represents a 2% increase compared to our original guidance ranges, with no change to CAPEX or other guidance categories. Coming off this acceleration of production in the first quarter, we anticipate a relatively flat production profile in the second quarter, with modestly lower standalone production in the second half of the year. The slight decline is driven by normal course fluctuations in working interests that occur during a large-scale development program. The revised guidance outlined on slides 10 and 14 reflect Permian Research's standalone projections and do not include the impact of the acquisitions we're announcing today. We expect those acquisitions to add an average of approximately 3,500 BOE a day during the second half of the year. Given the high-quality inventory of the acquired assets, we do expect to begin development in the second half of the year, which we anticipate will result in $50 million of incremental CapEx. In summary, this is a terrific start to the year, and we are proud of what we have accomplished so far in 2024. I'd like to conclude today's prepared remarks on slide 11, which helps to reemphasize our value proposition for current and future investors. We think that the announcement today really highlights the quality of Permian Resources' business and the multi-pronged approach we have to driving outside shareholder value. Since the company was formed in 2022, we have delivered best-in-class returns for our sector, amounting to over three times the annualized return of the S&P 500 during that same time period. Our performance over the last two years has been driven primarily by low-cost execution and accretive transactions. And as a result, PR remains a compelling value within large capital oil and gas, particularly when recognizing that Permian Resources is now the second largest Permian interplay in the sector. Thank you for tuning in today, and now we will turn it back to the operator for Q&A.
spk10: Thank you, Mr. Walter. Ladies and gentlemen, at this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star 1 to ask a question, and we do ask that you please limit yourself to one question and one follow-up question. We'll go first this morning to Neil Dingman at Truist Resources, Truist Securities, excuse me.
spk14: Morning, guys. Nice job. My first question, James, may be on your DNC plan for you or Will. Correct me if I'm wrong, but I believe you're currently running about 11-12 rigs, three to four spreads, or about the same as PR and Erston was separately. And I'm just wondering, given your notable continued efficiencies that you certainly highlighted today, I'm just wondering, and I believe the goal of relatively flat production, maybe could you or Will talk about potential to a
spk05: drop rigs or spreads or maybe just how you see the maintenance plan on a go forward yeah i mean i think you're right like if you think about the plan this year we were originally saying we drill about 250 wells and and that kind of we thought that would take about 12 rigs uh With the efficiencies we're seeing today, I think it's very realistic that we could continue to execute on the same plan with less, you know, whether that's 11 rigs or kind of somewhere between 11 and 12, I think is, if we can keep these efficiencies as very much on the table. If you think back to kind of the Colgate C-DEV merger, it's a very similar playbook. You know, if you think originally that was an eight rig combined business that we were able to get down to six with the same level of efficiency. So we've done this before. I do think it's worth calling out it's We're not solving for kind of some maintenance plan or production per kind of the last part of your question. It's much more just an input of what's the return environment, what's the macro look like from a supply-demand perspective, and what are service costs look like so that we can kind of what the production does is more of an output. So we continue to see strong oil prices and reduced service costs. I think it's very real that we could decide to kind of keep the 12 rigs or even add rigs from here to go grow production, but What you see in kind of our revised guide is more of that stick to the 250 wells, and there's a chance we could do that with less equipment.
spk14: No, I figured that. Good to hear well. And then secondly, just quick on the bolt-ons, such as the recent two that you all highlighted specifically. You all seem just to have continued to have better success adding these accretive bolt-ons, you know, versus it just seems like I don't see as many of your peers being able to do this. I'm just wondering. Well, you know, what are the keys behind this? And, you know, can you kind of continue at this pace of, you know, adding a couple, two, three, it seems like almost every quarter?
spk08: Yeah, thank you. I think that's a pretty easy answer. I mean, I think first and foremost, it's something we're focused on that we prioritize. I think it's something we've done for a long time and have and continue to be really good at. And I think that's driven... They should give up by a couple of things. I think first and foremost, we have the lowest cost structure in the Delaware basin, which allows us to earn higher returns on the same assets. And as a result, kind of naturally over time assets like these do just flow to the low cost operator. I'd say second, we're based in Midland. You know, that's the heart of the Permian, the heart of the deal flow and, We've got a great reputation across the market of being good partners that people want to be across the aisle from on the transaction side, and that goes a long way. Finally, for today's example, I mean, this is really cool, and we're buying in an area where I think we do have a unique edge from activity and, therefore, the information side of things. We have more rigs running in this area than anybody else, and, therefore, more proprietary data to pull from, better understandings, et cetera. So I think you take all that together, and it does feel like something that's is definitely sustainable and an edge we'll continue to have. Will we do this every quarter? Probably not, but something we expect kind of over the long term to continue to be a big part of the story.
spk10: Great answers. Thanks, guys. Thank you. We go next now to John Freeman at Raymond James.
spk06: Good morning, guys. Great quarter. When I'm looking at slides six and seven and just, you know, these huge efficiency gains that you all continue to get out of the legacy Earthstone properties and I'm just trying to get a sense of what maybe that remaining gap is, if any, between kind of legacy Earthstone and PR on whatever metric, you know, y'all want to cite cost per foot or whatever. But when I look at all the different, the drilling days, the completion days, the production downtime, just some sense of how that compares to PR, just trying to see if there's still any gap left.
spk05: I think on the DNC side, the gap is very small, if not kind of non-existent at this point. We have different efficiencies and different assets in different areas, but we kind of view different areas, whether it's legacy Earthstone or legacy PR, no longer matters. It's all PR, and I think on the DNC side, that gap is closed. Where I think there's still some room is on the LOE side. We've made tremendous progress in a short amount of time of improving margins through kind of what we've done on the contract side, but also just reducing LOE. But a lot of the other LOE stuff, you know, think like SWD disposal agreements or recycling agreements have some time to them and require more work and more time to get fully incorporated. So as I think about kind of where the last kind of gap remains between legacy Earthstone and PR would be more LOE focused, if that makes sense.
spk06: That's perfect. Thanks. And then just the follow-up for me, you know, gas takeaway has been pretty topical, you know, what's going on at Waha. Just any sort of updated thoughts from y'all on how y'all are thinking about gas takeaway and how to address that longer term?
spk08: Yeah, I mean, I think it's pretty obvious to you to run the call. Pricing at Waha has been challenged this year and probably will be until we get closer to new pipes coming online in the fourth quarter. And, you know, I think that is what it is. We're fortunate that dry gas only makes up about 5% of our revenue in any given year. So the business really isn't affected. But, you know, I think kind of worth pointing out a couple other things. Only about half of our gas is exposed to Waha pricing this year. Kind of other half is either covered by, you know, attractive basis hedges or sales at better regional hubs today. But, yeah, it's something we're always trying to kind of focus on and work on. We sell... about a quarter of our gas at hubs other than waha today and you know are constantly looking to find ways we can get that percentage higher we actually have a contract probably get signed in the next week or two that should allow us to get more volume sold at houston pricing kind of next year so kind of more to come on that front i'd say that's something we've been working on for a long time and continue to chip away at but you know i think the most important thing is You know, we've got awesome partners on the midstream side. We've got firm capacity, and our molecules are going to flow, you know, even if we saw regional constraints later this year.
spk06: Thanks. Appreciate it.
spk10: Thanks, Sean. Thank you. We go next now to Scott Hanold at RBC. Hey, thanks, guys.
spk02: I was wondering if we could go back to sort of the outlook through the balance of the year and just holistically how you guys like to think about the business. Obviously, your cycle times are improving, so you pulled for a little bit more of your activity and production in one queue. And so, like you kind of said, it does taper and you have a soft decline in the back half of this year. But how do you think about the setup then for 25 with that? Would you guys... Or into 25 and over the long term, you know, like to see more kind of flattish growth, you want to see some more moderate growth and And if you could talk about like any any kind of cadence variability through through the year, you know, is, you know, would you like to keep things constant or, you know, do you think there will be some cadence, depending on the cycle times
spk05: I think, I mean, first and foremost, kind of as we think about the trajectory from a production perspective of the company, I've said it many times, I'll say it again. Like it really is a returns driven input and production is just an output. Obviously kind of over the last, you know, two weeks ago, I'd say the returns environment was extremely good. And, and we've had, we've made some headway on the service cost side kind of over the balance of the year. So it was looking good. I think that today it's, It's still good, but not quite as good as it was a few weeks ago. And I don't yet know what the world will look like six months from today as we go into 25. I would say that kind of the, really, if you think about what happened over the course of this year so far is it's just been the whole schedule has shifted forward. We've just, we're drilling wells faster, we're completing wells faster. And as such, kind of just given the natural work interest changes over large scale development, the back half of the year are really kind of dip is just really a little bit less work interest under a few wells that moved in from the next year. And that naturally corrects itself. So said differently, if we maintain the same pace, kind of call it 250 to 260 wells per year, like that actually does set up for a really good 25. It's just not, it's kind of a slight decline back half of the year and then bounces back in 25. I'm not saying that is our plan. We're going to spend a lot of time over the next, six months figuring out exactly what to want to do to 25. And I think it could be anywhere from 11 to 13 rigs based on commodity prices. And we'll kind of see what it makes sense there. But, but as I think of, I wouldn't think of this kind of slow tapering back half of the year as an indication of kind of future trajectory of the production profile and outer years.
spk08: Yeah, this, this plan is great. It sets us up like we always try to do. It's really good optionality because we don't know what the world's going to look like in 25. And, kind of puts us somewhere in the middle of that 0% to 10% growth over the long term that we've talked about, and we can make a decision as we get closer to that year.
spk02: I appreciate that commentary. And in your prepared comments, you also mentioned that you're seeing some better performance or efficiencies in the midland, and it sounds like you weren't necessarily expecting. Could you give a little color and context behind that? exactly what that is and where the benefits were. Was it more well productivity or is it cycle times or just cost reductions on OpEx?
spk05: It's really just DNC CapEx. We have not drilled a lot of wells in the Midland Basin, so didn't expect to be able to cut near the amount of cost on the Midland Basin side as we have on the Delaware, and we've been surprised to the upside in that regard. I still think we have a ways to go to catch up with where the the leading operators in the Midland Basin are from a CAPEX perspective, but we've made big strides that kind of surprised us to the upside.
spk02: And was that more on just the cycle times drilling and completion time of those wells?
spk05: Yeah, it's just cycle times, casing design, kind of everything that would lead to a lower CAPEX per foot on a Midland Basin well.
spk10: Got it. Thank you. We'll go next now to Gabe Dowd at TD Cowen.
spk11: Thanks. Hey, morning, everyone. Appreciate the time. But I understand it's certainly a little bit too early to be thinking about 25, but I guess just piggybacking off Scott's question here, if we just think about all the synergy capture and efficiency gains and maybe this year being a little bit heavier on midstream spend or infrastructure spend, I should say, Is it fair to assume maybe 25, assuming similar activity levels? CapEx is probably a bit lower than where we are today?
spk08: Yeah, I think kind of certainly maintenance CapEx would be lower than what we've outlined this year, just kind of given where the business is, the efficiency, et cetera. I think that's definitely a fair assumption. Okay.
spk11: Okay, great, great. And then maybe as a follow-up, noted – or talked about egress a bit, but just curious in that northern New Mexico area in both Eddie and Lee, are you seeing any processing capacity tightness or any other mid-tree managers that are worth mentioning? I recognize there's no rigs over in Eddie County just yet. Is that driven by constraints at all, or are you guys just planning on getting after that in the second half of this year?
spk08: Yeah, I mean, I think the kind of lack of rigs in any area today is just driven by our focus on doing some of these larger developments and making sure when we put rigs on it, we're doing it as as quickly as efficiently as possible and touching kind of all parts of the cube that need to be co-developed. So no, but I think macro wise gas processing constraints, it actually feels really good this year. You know, I think last year we'd mentioned before probably Q2, Q3 timeline, there were more challenges on the processing, but even more kind of infield compression and kind of plumbing issues in the middle of last year. But those have all really resolved themselves. I'd say our midstream partners have done a ton of work and spent a ton of money. And, you know, our gas processing in the New Mexico-Delaware feels like a great spot today. And frankly, thankful not to have any constraints of that nature or really anything else, kind of able to do what we want up there.
spk11: Okay, awesome. Great to hear. Thanks, guys.
spk13: Thanks, Gabe.
spk10: We'll go next now to Derek Whitfield at Stiefel.
spk13: Good morning, all, and congrats on a strong update. Thank you. With my first question, I wanted to lean in on your D&C efficiencies to better understand the rate of improvement you're seeing. If we were to compare PR to PR on slide six, how do the cycle times in the Northern Delaware compare with your Q4 averages?
spk05: PR to PR from Q4 to Q1, we've gotten better, but it's going to be kind of single digit percent improvement as compared to the big improvement you see if you compare legacy or send to PR.
spk13: Great. And then maybe shifting over to slide 9, the identified location count of 110 gross locations appears conservative to us on the surface. Can you offer any color on the degree of legacy operator development and your general underwriting assumptions for this part of the basin?
spk08: Yeah. I mean, I'd say it's actually a good question and very astute. Answer your second question first. It's pretty undeveloped in Acred's position. There's a handful of wells on it, but it's as undeveloped as any asset we've looked at in a long time, which is great, because it allows us to come in, take advantage of clean fairways, and kind of do what PR does best. As regards to inventory, yeah, I think it probably is conservative. I think we're trying to book locations that we have a very high degree of confidence in here. And is it more likely to have more zones kind of come into the money here? I think the answer is probably yes, but we feel good about what we put out about being a real base case and something that we can stand behind.
spk13: Terrific. Great update. Thanks for your time.
spk10: We'll go next now to Leo Mariani at Roth MKM.
spk09: I wanted to dig in a little bit to your comments around kind of flattish second quarter production and then kind of slightly lower in the second half. I heard your comments right. It sounded like a lot of this was just based on working interest changes. I was hoping maybe you could kind of quantify some of that. I mean, I think you guys are talking about 75% average working interest, but maybe it's a little higher in the first half and lower in the second. Just any help on that would be great.
spk08: Yeah, I think it's just kind of normal fluctuations when you're running a multi-rig program like this, especially if you're kind of stacking rigs to pursue the full field development strategy that we've been pursuing for a long time. Like, one quarter maybe 70%, one maybe 80% to get back to an average of 75%, and just kind of how it is. I think you see this especially kind of over time as you have more concentration of rig counts on particular developments, but it's all normal and kind of evens out over time.
spk09: Okay, but it definitely sounds like working interest is a little higher in the first and a little lower in the second half, and then how would that translate into CapEx? Would that basically give you a cap X a little lower in the second half, standalone versus first half?
spk08: Yeah, I think that's a good assumption.
spk01: Okay. All right. Thanks, guys.
spk10: We'll go next now to Oliver Wang at TTH.
spk01: Good morning, all, and thanks for taking my questions.
spk00: I wanted to start on the A&D side. I can't help but notice you all have been fairly active in this area of Eddy County, kind of looking back at where the Q1 bulletins and the latest two transactions announced last night sit. So just kind of wondering if you all might be able to speak to if there is anything specific that you're seeing in the area that's driving an increased focus from an A&E perspective for you all.
spk08: You know, that's a great question. And I think kind of post-closing of our stunt to today, we just saw a real market window where we were able to go buy TAB, Mark McIntyre:" For extremely attractive bolt ons and you know quite a few grassroots deals. TAB, Mark McIntyre:" At prices that that were really attractive to us, and I think the reason we're able to do so, which I touched on a little bit with neil's question at the beginning was because. TAB, Mark McIntyre:" we've been the most active operator in this part of any county for a long time and therefore had a lot of really exciting proprietary results, both on kind of zones well performance, and I think, most importantly, the cost side or we're doing this. cheaper up here than I think anybody would expect. So kind of just a unique, it's kind of one of those windows that we saw an opportunity and we hit it hard. And I think these are some of the best deals we've done. So yeah, I think it wasn't, you know, I didn't think we'd get all of these deals the way we did, but it's a great outcome and it adds some really core inventory and what's our most capital efficient asset.
spk01: Makes sense. And for my follow-up,
spk00: Just kind of wondering if you all could provide an update on your royalty position. It seems like an aspect of the business where you all have been able to steadily pick up some decent interest of the past nine months or so that's kind of going under the radar. So any color there would be helpful.
spk08: Yeah, I mean, I think we're always trying to buy acreage and inventory that competes for capital. And a big part of that is what is the royalty burden? So we target assets that have advantage in their eyes, lower royalties that really just help our capital efficiency. I think today we've got a royalty business that we're really proud of, kind of 75,000 net royalty acres is not insubstantial. I don't know if there's anything strategic that we have planned with that today, but I do think that's a big part of our capital efficiency story. We're getting more free cash flow for every dollar of capex that we spend as a result. So I think ultimately it's something that just makes our widget better and helps our value creation increase over time. So it's something that We're proud of, we're focused on, I think probably a little underappreciated by the market, but it really ultimately comes down to helping us earn better returns on every dollar that we spend.
spk01: Makes sense. Thanks for the time.
spk10: Thank you. And just a quick reminder, ladies and gentlemen, star one, please, for any questions today. We'll go next now to Jeff Jay at Daniel Energy Partners.
spk04: Hey, guys. I was just looking for, I know you referenced your power infrastructure build-outs. Would kind of love to hear what's happening there, what the scale of that is, how big that's going to be for you guys. It's obviously kind of a pressing issue these days.
spk05: Yeah, look, line power in the kind of entire Permian is tough. In Texas, it's tough. And in New Mexico, it's tough. So we're trying our best to stay in front of it. I'd say kind of as you think about our Our power needs, if we can be on line power, that's obviously preference. And after that, if we can kind of leverage natural gas power generators is probably the second best answer. And that's kind of what you'll see for the majority of our New Mexico infrastructure. But it's a priority for us. I'd say we are actively looking at ways to improve that position, collaborating with others to look at building incremental substations and really anything we can do. But it doesn't come quick. And I think it'll be a challenge for the industry for the next few years. I don't think it means we won't be able to produce our wells. It's just a little bit less efficient to be on natural gas power generators than it would be to be all online power.
spk04: Okay. Thanks. I appreciate it.
spk10: Yep. Thank you. We'll go next now to Paul Diamond with Citi.
spk12: Good morning. Thanks for taking my call. Just a quick one talking about the acquisition pipeline. As you're seeing, looking forward to kind of what's next, are you seeing any kind of movement on the bid asks based on scale, location, or is it all pretty much pre-cohesive and correlated?
spk08: Look, I think our pipeline on the A&D side feels really good. You know, I think there's a lot of, there's going to be lots of opportunities in the Delaware, and I think our position as a kind of preferential party for a lot of sellers and a low-cost operator in the basin position as well, As assets come for sale, kind of both marketed deals, which we participated in successfully, but also, I think just importantly, kind of off-market assets, which has been a large chunk of our acquisition program historically, but it feels good. I don't think, there's probably not the size of deals that you saw hitting the market in 22 and 23 in the Delaware, which I think we largely stayed on the sidelines from, but I think we're seeing a lot of stuff that fits kind of the grassroots side is maintaining a lot of momentum and We're still seeing lots of bolt-ons probably coming down the pipe this year. Will we wind up acquiring all of them? Definitely not. But are there some that could fit? I'd like to think so, but we're really picky and we want to buy assets, like I said, that make our business better and that earn a high rate of return and drive value for shareholders. So, you know, if we can continue to do that, that's great. But we've said it before, we don't need to do anything. We've got an incredible inventory base and incredible standalone business. So if we can find those opportunities, we'll be excited to pursue them, but certainly don't feel any pressure to do so.
spk12: Understood. And just a quick follow-up. So that's where you guys have been pretty balanced with your shareholder return framework. Is there anything you guys are seeing in the markets that would kind of tip that scale one way or the other?
spk08: No, I mean, I think, you know, we're going to kind of naturally bias towards the dividend. I think that the variable dividends are our base case and, you know, we'll be opportunistic on potentially increasing share buybacks at some point in the future if kind of dislocations and large opportunities exist. But No, I'd say really steady as she goes on the capital return strategy. I do think it's worth mentioning, you know, we did show a 20% increase in our Bates dividend this year, which it hit for the quarterly dividend payment upcoming, and a nice increase in our variable cash dividend as well. So it feels like that's working really well, and, you know, we're excited about it.
spk12: Understood. Thanks for your time. I'll leave it there.
spk10: Thanks, Paul. We'll go next now to Kevin McCurdy at Pickering Energy Partners.
spk03: Hey, good morning. To follow up on an earlier question about M&A, your last couple of deals have been concentrated in the Northern Delaware. Just kind of a general question on how you are viewing opportunities in the Southern Delaware versus the Northern Delaware. Are there, you know, as many opportunities out there and how do you kind of compare the two of them?
spk08: Yeah, I mean, I think that's a great question. I think looking back historically, the kind of first consolidation wave in the Delaware was Texas focused. If you think like 2017, 2018, 2019, a lot of Texas businesses, and that's where the Delaware got, you know, started, or at least activity was, was faster to begin. So I think you kind of, you've seen a natural consolidation wave in the Delaware as of late. I think for us specifically, we'd be, we got a great Texas position today with some really high return to go forward drilling to do. If we could find opportunities in Texas that, compete for capital like what we've seen in New Mexico, we'd be really excited about it. You know, I think those opportunities do still exist. I just think kind of, you know, the majority of assets that we've seen that fit what we're trying to do from a making the business better standpoint have been in New Mexico the last couple of years. But I think that could change and we'd be really excited if we could find similar opportunities on the Texas side.
spk03: Great, and changing gears a little bit, you mentioned an additional 3,500 barrels a day equivalent and an additional $50 million of capital once you close the bolt-on acquisitions later this quarter. Just to clarify, is the 350, or sorry, the 3,500 barrels a day flowing, is that flowing production now? And if so, what will be the production impact of the additional $50 million capital sent?
spk08: Yeah, that production is online now. The majority of that's from an acquisition we haven't closed and don't close to the end of this quarter. So it's kind of online now, but it's not ours, if you will. And then that $50 million is CapEx that we're going to spend in the back half of this year. That awesome, awesome high return inventory. Really excited to get our hands on it. We don't own it today, so we can't get rid of it. All the production you'd see from that is going to show up next year, but yeah. But really strong returns and something we're excited to get after as soon as we can get our hands on the asset.
spk03: Great. Thanks for the clarification.
spk10: And gentlemen, it appears we have no further questions this morning. Mr. Walter, I'd like to turn things back to you, sir, for any closing comments.
spk08: I haven't gotten up to a great start in 2024. Our primary goal remains the same as it was when we announced the Colgate Centennial merger in May of 2022. to maximize shareholder value over the long term. And to 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. Thanks to everyone for joining the call today and for following the Permian Resources story.
spk10: Thank you, gentlemen. Again, ladies and gentlemen, that will conclude today's Permian Resources first quarter earnings conference call. Again, thanks so much for joining us today, and we wish you all a great day. Goodbye.
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