Permian Resources (PR) Continues Portfolio Optimization
Permian Resources Corporation PR has engaged in several transactions to optimize its asset portfolio. These new transactions include two bolt-on acquisitions and a sizeable acreage swap, along with the shedding of non-core assets and additional grassroots acquisition.
According to PR’s CEO, the company has acquired 14,000 net acres and 5,300 net royalty acres in the Delaware Basin. These assets have been acquired at attractive valuations. It plans to continue portfolio optimization in the future.
With a focus on managing its portfolio, Permian Resources has not only replaced more than 150 wells that were included in its 2023 development schedule but also effectively increased the inventory life of its portfolio.
The company has recently acquired a total of approximately 11,500 net leasehold acres and 4,000 net royalty acres in Eddy County, New Mexico, from undisclosed vendors. The acquisitions were valued at $175 million. The newly acquired properties consist of undeveloped acreage, which also offsets PR’s Parkway asset, known for its high capital efficiency. Furthermore, over 100 gross operated, two-mile locations have been identified in the acquired property that have high net revenue interests (NRIs), making them competitive for capital allocation.
The company’s management commented that development on this new acreage will start later in 2024. The company showed confidence in the new acquisition, citing that the newly acquired acreage is consistent with its Parkway asset, which is one of their highest returning assets.
Additionally, the exploration and production player has advanced smaller grassroots acquisitions and secured approximately 500 net acres through more than 35 grassroots leasing and working interest acquisitions. These assets were acquired before the drilling commenced, making them highly accretive for the company.
In the fourth quarter of 2023, Permian Resources completed the divestment of some of Earthstone Energy Inc.’s assets at a price of $67 million. These assets, spread across 2,800 net acres and located out of the Permian Basin, had produced 1,000 barrels of oil equivalent per day in the third quarter of 2023.
During the first quarter of 2024, a noteworthy deal of high-return, operated inventory was made by PR, which strengthened its position in Lea County, MX. Permian Resources acquired approximately 2,000 net acres with increased working interest near its existing holdings, in exchange for approximately 2,000 net acres of non-operated acreage and lower working interest operated acreage. According to the E&P player, development in the newly obtained acreage is expected to commence sometime in 2024.
Permian Resources kept upgrading its portfolio throughout 2023. The company made three bolt-on acquisitions and two acreage swaps, along with the divestiture of two non-core assets. Moreover, it made more than a hundred and forty grassroots acquisitions. Collectively, PR added 17,000 net acres and 7,300 net royalty acres in the Permian Basin, along with 200 high-quality, gross-operated wells in the core of the Delaware Basin. This resulted in the company replacing more than 100% of its developed inventory during 2023 at less than $100 million after accounting for divestitures.
Permian Resources will announce full-year 2024 guidance sometime in late February. It will also report fourth-quarter and full-year 2023 earnings during the same time.
In conclusion, Permian Resources has been proactive in its approach to divest non-core assets and has continued optimizing its portfolio through acquisitions and swaps. The company continues to increase the quality of its assets as well as expand inventory and strengthen its position in key regions like the Delaware Basin.
Zacks Rank and Key Picks
Currently, PR carries a Zacks Rank #5 (Strong Sell).
Investors might want to look at some better-ranked stocks in the energy sector, such as VAALCO Energy (EGY),First Solar, Inc. FSLR and Repsol REPYY. While VAALCO currently sports a Zacks Rank #1 (Strong Buy), First Solar and Repsol hold a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
VAALCO Energy is an independent energy company involved in upstream operation business with a diversified presence in Africa and Canada. With a large inventory of drilling locations in premium Canadian Acreage, the company’s production outlook seems bright.
First Solar is a market leader in comprehensive PV solar energy solutions. It specializes in designing, manufacturing and selling solar electric power modules. The company sells its products to project developers, system integrators and renewable energy project operators based out of Europe, particularly Germany. With the rising global trend to shift toward renewable energy solutions, the outlook for First Solar seems bright.
Repsol is a global multi-energy company, involved in exploration and production activities as well as refining and marketing petroleum products. The company is also actively involved in transitioning toward cleaner and more sustainable energy solutions. Recently, it announced the expansion of its network of renewable fuel refilling stations in Europe, demonstrating its commitment to a sustainable energy model.
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