Permian Resources Corporation Class A

Good morning and welcome to Permian Resources Conference Call to discuss its second quarter 2025 earnings. Today's call is being recorded. A replay of the call will be accessible until August 21, 2025 by dialing -660-6264 and entering the replay access code 92721 or by visiting the company's website at .permianres.com. At this time, I will turn the call over to Hayes Mabry, Permian Resources Vice President of Investor Relations, for some opening remarks. Please go ahead, sir.

Thanks, John, and thank you all for joining us. On the call today are Will Hickey and James Walter, our Chief Executive Officers, and Guy Olfen, our Chief Financial Officer. I would like to note that many of the comments during this call are forward-looking statements that involve risk 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 statement 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.

Thanks, Hayes. We are excited to discuss our second quarter results this morning. The operations team delivered our 11th consecutive quarter of solid operational execution in Q2 that included the fastest well drilled, the most drilled feet per day, and the lowest completion cost per foot in company history. This execution, combined with continued strong well results, support us raising our full-year production guidance while delivering a lower CAPEX guidance originally announced in February. Q2 is also a very volatile quarter that presented an opportunity for us to demonstrate our downturn playbook. In April, we opportunistically executed our buyback program with repurchases of $43 million of shares at an average price of $10.52 per share. And then in May, we signed the approximately $600 million Apache acquisition at lower than mid-cycle commodity prices. This acquisition is the exact type of deal we like to do with meaningful overlap with our existing assets, strong free cash flow, and inventory that competes for capital immediately. We closed the acquisition approximately six weeks ago and are even more excited about our ability to optimize operations and the acreage position. These types of countercyclical investments are exactly what we want to do to be able to deliver leading shareholder returns throughout the cycles. And we've done so while maintaining leverage of approximately one times and liquidity of $3 billion. After executing on all aspects of our downturn playbook and taking advantage of recent market volatility, we are still in a prime position to pursue further investment opportunities to create long-term shareholder value. Moving to Q2 reporting details, production exceeded expectations with oil production of .5,000 barrels of oil per day, which includes approximately 900 barrels of oil per day from the Apache acquisition, which is in line with our prior messaging. Total production for the quarter was 385,000 barrels of oil equivalent per day. Results were driven by strong well performance from both our base wells and recent pops, which resulted in an adjusted operating cash flow of 817 million and adjusted free cash flow of 312 million, with 505 million of cash capex. Additionally, our ground game machine continues to fire on all we added 1,300 net acres across 130 different grassroots acquisitions in Q2 to build additional interest ahead of near-term development. These opportunities remain some of the highest returning investments in our portfolio and are a core piece of the PR story to maximize the value of our assets. That, I'll turn it over to James.

Thanks Will. Turning to slide five, our strong balance sheet is what gives us the confidence to prudently invest capital across all cycles in our business. This has been a key part of our business model for the last 10 years and remain a core part of our strategy going forward. One of our primary goals has always been to achieve investment grade status and we're thrilled to announce that we have received our first investment grade rating from Fitch. We are proud that Fitch recognized our strong credit metrics and track record of operating with a financial strategy consistent with an investment grade company and would expect the other rating agencies to reflect investment grade status in the near term. We are fortunate that the PR business generates tremendous free cash flow which allowed us to execute a $600 million bolt on and 45 million share buybacks with cash on hand all while ending Q2 with leverage at one time and $3 billion of liquidity. And we generate significant free cash flow going forward. The beauty of the PR business today is we don't have to choose between debt repayment, acquisitions, buybacks or building cash. We can execute on all of these as soon as opportunities present themselves. This provides the ultimate flexibility to efficiently allocate capital and drive value for shareholders. Turning to slide six, we want to spend some time discussing how Permian Resources is approaching the marketing of our hydrocarbons. Given our rapid growth, we have historically focused our midstream and marketing efforts on flow assurance and low fees. And we've been extremely effective at ensuring all of our hydrocarbons can get to market with zero interruptions over the past 10 years. But as our business has grown to the scale of this today, it has become apparent that our marketing strategy needs to evolve. Over the past 12 months, we've built out a full midstream and marketing team in Midland that has made great progress selling more hydrocarbons downstream of the Permian Basin and improving our netbacks. We're fortunate to have had significant flexibility to change the sales point for a large percentage of our current gas volumes. And we're pleased to announce we've recently entered into multiple new transportation and marketing agreements to optimize PR's pricing. Slide seven goes into a little more detail on the impact of the recent downstream contracts we have executed. On the gas side, we have entered into multiple transportation and marketing agreements to sell a significant portion of natural gas to non-Waha hubs on the Gulf Coast, central Texas, and East Texas. These agreements should provide an incremental 75 million cubic feet a day of firm transport by year end 2025, which ramps to 450 million a day by year end 2028. On the crude side, we've entered into multiple new crude oil purchase agreements providing improved netbacks to diversify pricing and increasing exposure to the Gulf Coast markets. We expect the net impact of these agreements to improve our gas netbacks by over 10 cents per MCF and our crude netbacks by over 50 cents per barrel. The cumulative effect of all this effort by our team results in a $50 million uplift to 2026 free cash flow versus 2024. We were excited about what we've done in the past 12 months on the marketing side and still retain significant flexibility for further optimization. So into slide eight, we're excited to roll out a revised plan that incorporates our recent bolt-on that closed in June. This plan reflects an increase to the original full year 2025 production guidance by 3% while lowering the capital budget by 2%. The only other major update to point out is the impact of the One Big Beautiful Bill Act. Overall, we view the recent bill as a strong step towards further unlocking the potential of U.S. shale. The tax provisions should further incentivize investment in domestic shale production and meaningfully reduce permeant resources taxes over the coming years. We expect current cash taxes to be less than $5 million in 2025 and less than $60 million in 2026 and 2027. In addition, our industry will benefit from the reduction in red tape associated with federal drilling permits and federal lease sales, the reduction in complexity of coming in federal and state production, and the further incentives for research and development. It is our belief that these tax and regulatory benefits far outweigh the modest impact we expect tariffs to have on steel and other input costs. I'll be concluding today's prepared remarks from slide nine where we reemphasize our value proposition for investors. We're proud of the hard work our team has put in and the strong returns that work has delivered for investors so far. We think it's important to point out that this peer-leading total shareholder return has been driven by the growth in free cash flow per share rather than a re-rating of our multiple. We believe our balance sheet, our industry-leading cost structure, and low break events position the company to succeed and create value for investors in any commodity price environment. Thank you for tuning in today and now we'll turn it back to the operator for Q&A.

Thank you. Ladies and gentlemen, we will now begin the question and answer session and if you wish to ask a question, please press star and one on your telephone keypad and wait for your name to be announced. Once again, star and one if you wish to ask a question. If you wish to withdraw from the polling process, please press star two. Please stand by while we'll compile the Q&A queue. Thank you for waiting. We now have our first question and this comes from Scott Held from RBC Capital Markets. Your line is now open.

Thanks. Good morning. I wouldn't mind a little bit of color on your recent production performance. It looks like you've tilled what less than half your planned program for 2025 and two queues outperformance and I guess relative to my model was pretty strong. I think there might have been some improved NGL yields in there but can you just generally talk about like maybe was it timing it tills or the type of well you're drawing because performance did feel pretty robust this quarter?

Yeah, I mean the first half of the year has been we drilled some awesome wells. I think that it's been a production comes from a combination of a lot of places. The base production is the overwhelming majority of the barrels we produce every quarter and we've been fortunate to have had a pretty mild summer, good weather, so really, really good downtime statistics and then well results continue to impress. The Delaware Basin has kind of been the place to be and good rock outperforms more often than not so we've been in a fortunate position that we kind of keep hitting our numbers or beating the numbers quarter over and I think that's just a kind of representation of the good rock that we have.

Okay, thanks for that and this is my follow-up. When you sort of look at the landscape right now, I mean obviously it feels a lot better than it did back in the first quarter but as you look going forward in this relative outperformance, I guess this year you did step up your production guidance obviously related to the outperformance but on a relative basis unchanged capex and you know how do you think about maybe letting some of that benefit accrue to the capital side versus the production side and is it in part due to the commodity price outlook or is it more just what's most efficient operationally?

Yeah, I mean I think for us like we did take down standalone capex by 50 million dollars kind of this quarter as you can see on updated guidance. I think a little bit less activity. I think for us it's really going to be a judgment call depending on what we view the macro environment looking like over time. Like I definitely agree with you that the market and the downside risk feels a little better today but I'd say there's still a tremendous amount of uncertainty with regards to commodity prices and what the overall economy does. So I think for us we're being patient, we're in wait and see mode. Like said if you have a little bit of outperformance in Q2 that's going to show itself I think very modestly in our production numbers but going forward I think it's going to be really a judgment call and we're going to react to what we feel like is the best real-time information we have and make a call as we get there.

But it'll be more commodity price returns driven than efficiencies of operations. I say within reason I have all the comments in the world that our team can add activity, drop activity without missing a beat. They've shown it in the past so we are there is value in keeping the same crews in the same rigs out there but it's not something that we're scared to do if it makes sense.

Okay thanks for that.

Thanks. Thank you and the next question comes from John Freeman from Raymond James. Your line's now open please go ahead.

Thank

you.

Good morning. Really like the steps that were taken with these marketing agreements that y'all outline on slide seven. Any help y'all can provide on just sort of how to think about the impact of the GP&T sort of unit costs the next couple of years in light of these agreements?

Yep right now there won't be a change to GP&T based on those agreements. We have some flexibility to do different things with gas over time that could change that but we talk about that then. So right now don't need to adjust

GP&T. And what we've shown on slide seven that the 10 cents for MCF and the 50 cents per barrel that's that's net of all expected implied costs.

Okay that's good to know and then on the same topic and we all highlighted that you know you've sort of the the midstream strategy is sort of evolved over time as you all become you know one of the largest you know both oil and gas producers in the Permian. You talked about kind of doubling the size of the midstream and the marketing team and you know we've recently seen some of the the large GMP start moving more towards kind of stepping up or expanding their kind of midstream presence taking ownership of midstream assets. Just as y'all think about just giving your size the evolution of the company is that some is that a direction that y'all may head eventually?

Yeah I think we've we definitely evaluated options like that as part of the the deals we've announced in this QT release and some other ones that we've been working on. I think our view on that by and large has been the same with regards to midstream and kind of large scale infrastructure projects is that those really don't compete with the returns of our upstream business and that's by a wide margin. I think we're seeing such attractive rates of returns at the wellhead that we think it's more prudent as capital allocators to focus our efforts on doing what we do best. This is drilling completing wells and making oil. I think you know I think those projects are are good. I think probably better fit for more infrastructure like capital for us and we're able to get all of the benefits other than the equity investment kind of from the types of deals that we've done and I think that's probably the right base case going forward.

Great appreciate it guys.

Thank

you and the next question comes from Neil Mehta from Goldman Sachs. Your line is now open.

Yeah good morning Will, James and team. I just would love you to unpack a little bit more about your downturn playbook which you alluded to in your remarks and in the release. Just for for those of us on the line talk about what your downturn strategy is to make sure that if we are going through a period of softer commodity how do you ensure that you you come out of it stronger?

Yeah I mean I think the kind of the kind of most important part of that is having a high quality business and a strong balance sheet. You know I think the quality of our business shows itself on our leading low break evens in the Permian and a balance sheet that's you know been in a tip-top position of strength for really as long as we've been running this business. So I think if if you're going to go through a downturn it starts with asset quality and balance sheet and I think that's probably that's probably the ante and then beyond that you know I think we've actually proven over time that we really think the best opportunities for investing in E&P can be periods of kind of market panic and dislocation and like Will said that can show itself in a lot of ways and we did a lot of this albeit on a somewhat smaller scale and in Q2 which is you know buying high quality assets at lower than mid cycle prices it's buying back shares when you believe the I think it's all it's doing all of that while making sure your balance sheet is strong throughout kind of from from peak to drop. So I think for us you know that's something we've been talking about for the last couple years and we're actually excited about the opportunity to you know do some of those strategies and execute those pretty well in Q2 although it's probably a shorter period of dislocation than a lot of the ones we've seen you know that things could turn at some point in the future and we'll always be ready.

And then the follow-up is just there's been a lot of talk about M&A in some of the larger cap conference calls and just your perspective certainly you guys have been a great consolidator of assets opportunistically with really smart bolt-ons and transformative M&A as well but your perspective on you know whether you see as a consolidator or potentially a seller over time? Recognizing it's a tricky question but it's a I think an important one.

No that's a fair question and a good one. I mean I think given our leading cost structure we've always said we view permeant resources as the logical consolidator of Delaware basin assets today and frankly we're really excited about that opportunity set and what's in front of us. You know we talked about our ground game efforts remain strong. We've continued to find larger scale acquisitions like the Berea Draw acquisition last year, you know the Apache Bolt-on earlier this year and several hundred million dollar deals kind of in between but we're I think we're confident too that that that pipeline remains robust and we'll be able to find those types of attractive acquisitions that make our business better. So I think you know we don't have a perfect crystal ball but I'd say really excited about what the answer is to the flip side of your question I'd say we really do believe that our business has a tremendous amount of go forward potential on a standalone basis. You know I think we believe that if we continue to execute to the levels we're actually on today that we can continue to grow free cash flow per share like we've done since inception and you know as a result of that drive significant outperformance kind of versus the modern market and peers on a total shareholder basis like like we've done in the past and frankly like you can see on slide nine but but look ultimately our goal has always been to do what we believe creates the most long-term value for shareholders whether that be acquiring assets or divesting them buying businesses or or ultimately selling our business and you know we've made every decision we've ever made running this business as shareholders and together our team owns over six percent of the assets. I think investors can rest assured we're going to continue to be super aligned with the entire investor base and do whatever we think will make the highest long-term returns and create the most value for investors whichever path that may be so I think really fortunate to be in the position of a kind of perfect line with investors and going to be focused on doing what makes the most sense over the long term.

Yeah really good answer thank you so much.

Thank you. And the next question comes from Kevin McCurdy from Pickering Energy Partners. Your line's now open.

Okay good morning. The market may be a little spoiled as we usually get an update on lower well costs from you guys. I realize maybe there's some moving pieces with the tariffs but your quarterly capex was very good and you started off to call mentioning record drilling times. Any thoughts on the magnitude of efficiency or drilling improvements you still see down the pipeline?

Look I think we proved to ourselves this quarter that the you know the best wells can be better than we've seen in the past and I didn't even mention it but we another stat that was cool as quarters is we drilled five of our fastest 10 wells ever in Q2 so we're starting to really push the envelope of the best wells you know we need to keep making progress on the average on the worst wells and on the worst wells but on the drilling side you know time directly correlates to the bottom line you save about a hundred thousand dollars every day you can cut and so I think we've proven to ourselves there's a lot of stuff we can go get and we we've done it now on a handful of wells we just got to go do it on the average and yeah you're right like Q2 our well cost on a per foot basis probably flat ish to Q1 I think some of that we drill a little bit shorter lateral links you don't get quite the efficiencies just the way the schedule shook out but if you look at the kind of what we did on the frac side and the progress we've made on the kind of top core title of drilling side I think there's a lot of tailwinds into the back half of the year.

Great sounds like there's still some improvement to come and as a follow-up any change to how you're seeing the the cadence of turn-aligns this year and how much of your program do you have left to execute in the back half of the year?

Thanks. It's the same it's the 10 that we dropped from the original budget I think we're slightly back half-weighted but it's the same as we last time we talked to y'all.

Great thanks Kevin.

Thank you and the next question comes from Philip Jungwert from BMO. Your line is now open please go ahead.

On premium gas marketing there's a number of projects in development to take gas to the gulf coast but we're also seeing proposed projects to move volumes to the Rockies and even based on yesterday's news the west coast so while it's early on on those options just wondering much you're considering these other outlets as a way to maximize netbacks and ultimately how much waha exposure would you look to maintain given there should be some tightening in the differential after 2026?

Yeah I mean I think the shortages we're excited about all these projects you know I think we've been firm believers for a long time that we need more pipes out of the basin sooner. I think we're pretty excited about just the broader backdrop and I'd say the willingness of pipelines to get out ahead of the kind of growth and gas we see and expect to continue to see in the Permian side. We think this is a great thing for Permian resources, a great thing for the Permian basin and I think it'll ultimately be a great thing for the owners of these pipelines. I think we're not kind of as you saw in my notes like we're not just set on going to the gulf coast on the gas side. I think we're open and excited to explore different markets. I think for us really just trying to solve for what we think is going to be bringing the best netback for every molecule of gas that we make. So I think we'll be constantly evaluating kind of each and every one of these. I'd say in terms of how much waha do we want on term I think historically we said you know we used to sell about 20 to 25 percent of our gas outside of the basin and you know 75 to 80 percent in basin and we'd like to reverse that over time. So I think the right kind of long-term answer for PR is probably 20 to 25 percent of our gas sales at waha something like that. I think we like that flexibility and kind of having you know the options continue to sell basin gas in the basin over the long term because there's just a lot of interesting things that can happen and potentially some exciting developments but I'd say that we kind of go from 20 80 to 80 20 over time.

Okay then congrats on the on the Fitch upgrade. Sounds like the others are going follow here shortly but besides the lower cost of capital sticking with the marketing angle here just how the IG rating at all three agencies kind of benefits you in terms of these opportunities and could it open up any potential deals that would otherwise not be available?

Yeah I think investment grades I call it modestly helpful relatives like we've entered into really attractive agreements with the ratings that we have so like all these things whether it's incrementally better terms on the midstream agreements whether it's more flexibility to longer term debt or whether it's more availability of credit through the cycle those are all positives for us from a balance sheet perspective and I'd say we're glad Fitch recognized kind of the fact that our financial metrics and financial strategies are consistent with are superior to a lot of our G peers and we're focused on getting the rest of the way there.

Great thanks.

Thank you and the next question comes from the SAC forum from JP Morgan. Your line is now open please go ahead.

Thanks for taking my questions. I wanted to follow up on on the marketing deals. We've seen a couple of your peers signed some power deals in the basin linked to power pricing. Is that something you've had any negotiations on or that you're considering doing?

Yeah we've looked at all of them. I think that's something we've actually spent a lot of time on over the past kind of 12 or 18 months. You know I think we haven't seen any in basin gas sales deals that we think we have confidence in can improve our net back relative to the other opportunities and we haven't seen anything interesting on the power side kind of in the areas where I think we need the power the most. I think most of what we've seen on the power side has been in Texas where we have really good grid connectivity and frankly really good kind of our comprising going forward. I think the area where we've needed more power connectivity has continued to be in New Mexico and we haven't seen a lot of projects there to date but are are certainly open to to them in Texas, New Mexico wherever they come and we'll continue to evaluate them as they come across our desk.

Thanks and then my follow-up's on your hedge book. You added a little bit during the quarter. Can you just update us on on how you're thinking about hedging on a go-forward basis?

Yeah no change on kind of overall hedge strategy which is roughly 30 percent, 20 percent, 10 percent hedged one, two, three years out. We were there on 25, have good progress on 26. I think what you've seen from us is like we're flexible in how we get there. We're not going to force ourselves into those equations but we try to be nimble and lean in when you have what seems like pretty clear dislocations like we saw in June.

With our balance sheet where it is today we're fortunate we can like I said be really patient. Like you know I think we're we're going to try to hedge more if we think prices are higher and and we could be comfortable hedging less if if there's fewer opportunities to walk in what we view as attractive prices. So I think we're we're building flexibility as the quality of our business grows and you know I think being opportunistic in late June and locking in kind of prices during that period of positive volatility was a great opportunity for us.

It makes sense. Thanks James. Thanks Scott.

Thank you and the next question comes from John Abbott from Wolf Research. Your line is now open. Please go ahead.

Hey thank you very much for taking our questions. I want to go back to slide seven in the marketing agreements and you know appreciate the free cash flow guidance on 2026 but the kind of it looks like the amount of capacity increased out to 2028. So I guess just to help us sort of triangulate things as you sort of look out the 2028 you look at sort of strip pricing. How would you describe the potential impact to free cash flow beyond 2026 of these agreements?

Yeah I mean I think for us I'd say there's a lot of movement in kind of different markets and strip pricing all the way out to 2028. So I think the answer we're comfortable giving is the existing contracts we expect to see kind of greater benefit than what's outlined in 2026 and I think we're continuing to find new opportunities to optimize. If you look at those charts in the middle of slide seven like you know we're kind of two-thirds contracted on the gas side using current volumes and about half contracted on the crude side. So I think for us kind of combination of the existing contracts that are shown on slide seven and kind of future optimization we expect to do I think you should expect to see that number you know go up as we get beyond 2026.

Appreciate it and then just following up you did close on the Delaware acquisition during the quarter. I mean the assets are in-house. Could you maybe speak to a little bit more about the opportunities in terms of savings and optimization now that you have the assets in hand?

Yeah so we closed six weeks ago kind of took over operations shortly thereafter. I'd say this is right in our backyard so this is you know from an integration perspective I'd say it was kind of integrated within a week. There's some quick wins on the production side just kind of obvious you know shared of people like we didn't we don't need near as many people because we already have pumpers like in the exact area. I think ultimately there'll be some wins on the water disposal side or water recycling side just given the kind of connectivity of the assets. I think that what's unique to this deal in particular is what our land team will do with the assets. If you think about kind of when we rolled that deal out it was very unique in that it came with a lot of really good operated units and a lot of non-op under PR but it also had some kind of really good high quality more scattered acreage that our team will go to work on right away. We are in the middle of discussing multiple trades right now that kind of get us into either core up in areas where you know we'd like to core up or get us into new units that we otherwise wouldn't be in. So not a lot of like super specifics and I don't have a look back on the numbers yet because we're you know four weeks in from from operating or something like that but we've had some quick wins on the people and water disposal side and I'm expecting some big wins to come on the land side.

Appreciate it. Thank you very much for taking our questions.

Thank you.

Thank you and the next question comes from John Ennis from Texas Capitol. Your lines now open. Please go ahead.

Hey good morning all and thanks for taking my questions. For my first one I assume the margin for error is extremely narrow to drill top decile wells let alone five of ten fastest in one quarter. Can you remind us of what has to go right to be able to do this? What and what did you do to have it go right five times in one quarter and then just how far the average is to these high water marks?

Yeah so to drill a top decile well you've got to have no unplanned trips. You have to basically have no NPT or near zero NPT and then we need to be rotating when we're drilling most of the time you know so basically no sliding no NPT and no unplanned trips. I think you're right for all three of those to go well it's an outlier that's not the average but we are I'd say those best wells are probably I mean the two that we drilled this quarter we're calling you know five and a half and six days something like that and our average is probably closer to ten and a half or eleven so not quite half of the average but close to it and so I look for us I think this is super exciting like our drilling team has not just one well but a you know a handful or almost two handfuls of wells that have shown this is doable and now they just got to go see if they can make that the norm and if we do it's very meaningful you know five or six days call it five or six hundred thousand on a gross basis per well like that's you know coming up on almost 10 percent of our well cost we could cut out. I don't think that's something y'all should expect to happen in second half this year but I do think that is a a long-term goal for us to try to go get.

Terrific for my follow-up in the release you highlight chemical and power optimization projects as drivers of maintaining low LOE during the quarter can you provide some more color around those drivers and more specifically what you are doing on the power side?

Yeah look our production team is always working hard to try to both increase runtime and cut cost and that's a balance because as you increase runtime it typically comes with more capital to get there. One project we've done two of these we call micro grids which is basically kind of behind the meter power where we'll set kind of larger scale power generation behind the meter and interconnect it to a bunch of different locations. It has a bunch of benefits one you know field hands who are who are out servicing that equipment or spend less time driving to multiple locations they just go to one spot. There's also some kind of economies of scale in larger scale power generation and better runtime so that that's been a kind of the kind of wins we look for where you get both better runtime and lower cost. We've done two of those today they've both been extremely successful I think power costs are down 30 percent on both of them. We're kind of working through now how many of these opportunities do we have you know as you can imagine if you're if you have a high concentration of wells in one area it makes a lot of sense because the capital for the power lines is less and if the wells are more spread out it starts to get skinnier on kind of your all-in return on investment. So I think it's other creative ways that we are always trying to get better. The production team takes a lot of pride in what they do and this quarter they really demonstrate it with some cool projects.

Great color thanks guys.

Thank you.

Thank you and the next question comes from Leo Mariani from Rock Capital your lines now open please go ahead.

Hi I just wanted to clarify some of your commentary on well costs if I heard you guys right you know second quarter was kind of flat as dollar per foot sounds like shorter laterals sort of drove that but if I heard you right it sounds like the expectation is that those well costs will come down in the second half of the year. You just wanted to clarify that and then additionally can you talk about how much of that you think can be driven by you know kind of sticky efficiencies and is there a cost component as well that you may benefit from?

Yeah look I think the things that we have in the back half of the year is my expectation are you're going to see an efficiency step up. We've demonstrated the ability to do it and I have no reason to believe that we can't replicate what we did in Q2 in the back half of the year. With the volatility we've seen and kind of depressed oil prices I'd say service costs in general are coming down a little bit. It's not you know there wasn't a ton of room to give but where we've had it we've gotten some and made some you know vendor changes and are always trying to figure out kind of the best way to optimize kind of the balance of efficiencies and cost per unit on our side and then there's a little offset in casing costs. You know obviously casing costs are up just due to tariffs and you know I'd say you give a little bit back there but yeah net net I'd expect cost per foot to be down in the back half of the year.

Okay appreciate that and I guess just from a you know high level perspective obviously you talked about kind of the macro if I if I read you your tone right sounds like you know you maybe there's a little bit of of caution just given that the current landscape should people generally expect you guys to try to kind of hold oil flattish for the foreseeable future in this kind of uncertain macro landscape and just kind of remain laser focused on reducing costs?

Yeah I think that's probably a good generalization. I'd say we we've kind of come out of several years of you know very pronounced growth and have said time and again this year that it does not feel like it's the right kind of market to return to what's been if you combine organic and inorganic you know several years of double-digit production growth you know I think just with the amount of uncertainty and the supply side and the demand side we've seen today we don't think that makes sense so I think that the kind of forecast for the near term and that could be you know months or that could be quarters until we kind of have more more confidence in in returning to growth I think kind of kind of flattish to kind of low single-digit growth is the right expectation and that's

what this question comes from Noah Hungness from Bank of America. Your line is now open. Please go ahead.

Morning Will James and team. To start off I was hoping if you guys could expand on the comments around the federal land and the commingling that's kind of been opened up. What does that mean for per mean resources? Does that kind of allow you to access what was potentially stranded acreage or yes use?

No it doesn't do that it's really what it does is allows us to build kind of central tank batteries in New Mexico like we use like we currently do in Texas like think if you've got two units that back up to each other and one had state and one had federal acreage prior to that we would have to build basically completely separate batteries which is for us to waste a lot of capital and I think generally just not the most efficient way to to run our business and with the new ability to commingle in New Mexico we can build one battery and just meter the wells like we do in Texas. So a little bit of capital savings really I just say the world's a better place you know smaller footprint less places to drive to and a little bit of capital savings so we're excited about I think it's a a really common sense thing that needed to happen for a long time and we're finally got done.

That makes sense and then on the updated guidance capital increased by the 20 million that I think you guys had previously flagged but the till count working interest and lateral footage was unchanged so is the increase in the capex from is it from just moving capital into higher cost part of the Delaware or is it or is there other spending involved there?

No the the increased 20 million was just there was there was eight wells that were work in progress wells that we took over from Apache that you know a little bit of capital flowed through to us kind of between effective date and closing or just post-closing.

Gotcha makes sense thanks guys.

Thank you once again as a reminder for those who want to ask a question please press star and one on your telephone keypad star and one if you wish to ask a question and the next question comes from Paul Diamond from Citi your line is now open please go ahead.

Thank you good morning thanks taking a call just wanted to quickly touch on the balance sheet you're all sitting at about 450 million in cash on our numbers that you know accretes pretty solidly over the course of the second half of the year. Can you remind us what you think is the right number to carry there or is there a plus or minus or what's the right number you want to hold on the balance sheet?

Yeah this is Guy I think right number 500 to a billion I think we've seen and kind of demonstrated the benefit of having you know this liquidity I think we we talked about last quarter we went into Q2 with the best balance sheet we've ever had we executed on the downturn playbook as we described and we sit here with half a billion dollars of cash on the balance sheet and one-times leverage so I think kind of our approach to the balance sheet and just make to making sure we have fire power for when we go into these downturns is a huge part of how we think we can deliver shareholder return over time.

Yeah that makes sense and then just one quick follow-up on the ground game cadence you guys have done a pretty good job over the first half of the year should we accept those or expect those numbers to remain relatively stable you know a thousand plus acreage per quarter or is there any reason to think the opportunity set is you know growing or shrinking?

Yeah I mean I think it's definitely lumpy I'd say we we feel awesome like they said in my opening remarks about our ground game pipeline I think that recent Apache New Mexico acquisition really helps open up some kind of new new fairways and new windows to pursue that so I think probably more I'd expect more ground game from here I think Q2 is probably a little bit lighter than it would have otherwise been with all the volatility you know I just think kind of with what happened at the beginning of the quarter from an oil price perspective it just takes a little time for both seller and buyer expectations to reset so I think you know all in I'd say we'd expect to do more ground game on on the back half from here.

Understood appreciate the clarity I'll get there.

Thank you and we have no further questions that came through at this time I'll now hand a call over back to Will Hickey for closing remarks please go ahead sir.

Thanks John this was an outstanding quarter for the PR team not only did we continue our operational track record in the field but also quickly executed on our downturn playbook which we believe will drive real value for shareholders given our high quality asset base and fortress balance sheet we believe we can continue this execution and value creation going forward in any commodity price environment thanks to everyone for joining the call today and following the Permian resources story.

Thank you this concludes our conference call for today thank you all for participating you may now disconnect.