Good morning, and welcome to Permian Resources Conference Call to discuss its third quarter 2022 earnings. Today's call is being recorded. A replay of the call will be accessible until November 16, 2022 by dialing (877) 344-7529 and entering the replay access code 5341497 or by visiting the company's website at www.permianres.com. At this time, I will turn the call over to Hays Mabry, Permian Resources Senior Director of Investor Relations, for some opening remarks. Please go ahead, sir.

Thank you. Thank you all for joining us on the company's third quarter earnings call. On the call today are Will Hickey and James Walter, our Chief Executive Officers; George Glyphis, our Chief Financial Officer; and Matt Garrison, our Chief Operating Officer. Yesterday, November 8, we filed a Form 8-K with earnings release, reporting third quarter earnings results as well as operational results for the company. We also posted an earnings presentation to our website that we will reference during today's call. You can find the presentation on our website homepage or under the News and Events section at www.permianres.com. I would like to note that many of the comments during this earnings call are forward-looking statements that involve risks 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 in the forward-looking statements sections of our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q for the quarter ended September 30, which was filed with the SEC this morning. Although we believe the expectations expressed are based on reasonable assumptions, they're 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.

Thank you, Hays. Good morning, and welcome to our first quarterly earnings call as Permian Resources. We are extremely excited having recently closed the merger of equals between Colgate and Centennial. Both teams have been working hard prior to and post closing, and I couldn't be more proud and appreciative of our employees' efforts. People are the foundation of any business. And if there's one thing the integration process has highlighted for me, it's the quality and talent of the employees from both legacy companies. I firmly believe that we have one of the highest-caliber employee bases in the industry, which will continue to create outsized returns for our investors. During Q3, our team executed very well in the field with no issues, producing strong well results while demonstrating cost control in a difficult operating environment, all while working through the integration of a corporate merger. On a pro forma basis, we operated 8 drilling rigs and 3 frac fleets during the majority of the third quarter, which spud and completed 36 and 38 wells, respectively. In addition to driving solid well results across both New Mexico and Texas, our production team has done an excellent job in the field as we saw a reduction in surface-related downtime quarter-over-quarter. As a result, we remain on track to achieve our fourth quarter 2022 and full year '23 targets. I'd also like to provide a quick update on merger synergies on Slide 7. On the D&C side, we've been implementing shared best practices and design changes to reduce cycle times and well costs. Our drilling department has reduced flat times, incorporated off-line cementing and optimized our operations since closing. During the quarter, we had 2 standout successes in our Parkway asset, where we drilled a 2-mile Second Bone Spring Sand well and a 2-mile Third Bone Spring Sand well in 8 days and 12 days, respectively. While these are fantastic early time results, we expect to pull additional levers in hopes of further reducing cycle times over the next 12 months. Additionally, we recently used our own recycled water during completions for the first time on legacy Colgate acreage, which not only advances our sustainability initiatives but also provides both capital expenditure and operating expenses savings. Going forward, we plan to use recycled water whenever possible in our operations. As you can see from our progress to date, we remain on track to achieve the $65 million annual synergy target laid out at announcement. I would remind everyone that our combined team has only been together for 2 months since closing. As a result, I'm confident that we'll continue to get better and really begin to show what this new company can do over the next several quarters. Before we touch on financial results, I'd like to quickly hit on the topic of full-field development as it certainly has become quite topical this earnings season. For the past several years, both Colgate and Centennial have been targeting larger scale multi-well codevelopment projects to efficiently develop our asset bases. Our strong technical teams work to make sure we are optimizing the development of our assets by simultaneously developing zones that we believe need to be codeveloped, maximizing the profitability of each pad while minimizing any future well degradation. Importantly, the idea of full-field development does not represent a change from how either company has developed their assets previously and won't change how Permian Resources develops the assets going forward. We are fortunate to be located in the Delaware Basin where we have over 4,000 feet of high-quality overpressured rock with over 8 proven intervals and significant frac barriers between many of the zones. Thus, we feel very confident in our 2023 plan and don't anticipate any major changes to our development philosophy or capital efficiency as compared to previous years. And with that, I'd like to turn the call over to George to review third quarter financials.

Thank you, Will. As a result of the merger closing on September 1, the quarterly results include 2 months of Centennial stand-alone for July and August, and combined company results for both legacy companies for the month of September. Given this dynamic, comparisons to prior quarters are not meaningful, and the fourth quarter will be the first clean quarter for Permian Resources. With that said, I'll briefly review quarterly financial results, which you can reference on Slide 3 of the presentation. Net oil production for the third quarter was approximately 48,500 barrels per day, and average net equivalent production totaled 92,000 barrels per day. During Q3, the company generated adjusted EBITDAX of $380 million, incurred approximately $200 million of total capital expenditures and reported adjusted free cash flow of approximately $160 million. Cost for the quarter came in largely as anticipated. Cash general and administrative expenses, as you can reference on Page 41 of the 10-Q filed this morning, was $15.1 million or $1.78 per BOE. We expect that both cash G&A and general, property, and transfer costs per barrel will continue to decline in the near term. I'd also like to touch on a few specific merger-related clarifications. First, during Q3, we had approximately $59 million of merger and integration-related expenses, which were in addition to the $6 million that were incurred during Q2. We estimate that the expenses realized to date represent approximately 75% of the total merger costs that we will incur. The balance of the expenses, which are primarily related to severance costs, will occur over the next 4 quarters and will taper over time. Turning to our corporate outlook for Q4 and beyond. As Will mentioned, as a result of our team's execution in the field, we are confident in the fourth quarter and full year 2023 targets that we provided in early September when the merger closed. On Slides 8 and 9, we summarized our capital structure, maturity profile, and liquidity position. In a cyclical industry like ours, maintaining a strong balance sheet and low leverage profile is critically important. As of September 30, we had approximately $45 million of cash on hand and $550 million of borrowings on the revolving credit facility. The company's $1.5 billion facility is governed by a $2.5 billion borrowing base and provided approximately $1 billion of liquidity at September 30. We expect to repay the revolving credit facility borrowings, utilizing free cash flow over the next several quarters. Total net debt was approximately $2.3 billion and we estimate that net debt to LQA EBITDAX was less than 1x. Finally, we are pleased to have announced our first quarterly base dividend of $0.05 per share, which will be paid on November 29 to shareholders of record on November 21. With that, I will turn the call over to James.

Thanks, George. One other item that has been very topical this quarter is natural gas marketing and takeaway. Like most of our peers, we expect regional gas markets and takeaway out of the basin to get tight as we head into 2023. As you can see on Slide 10, we've been proactively managing our midstream exposure ahead of potential weaknesses at WAHA next year. Across commodities, our goal is to ensure takeaway and maximize our netbacks by pricing as many hydrocarbons as we can at end markets rather than regional hubs, and we are excited to announce that we continue to make real progress in that regard. We recently entered into a revised contract with one of our primary midstream providers to sell a significant amount of our residue natural gas at Houston Ship Channel pricing. This contract revision allows us to both realize better prices for a large portion of our residue gas and increase flow assurance out of the basin. At current commodity prices, we expect this contract revision to result in over $20 million of incremental free cash flow in 2023. In addition to advantageous Gulf Coast pricing, we further mitigated our exposure to WAHA through the use of basis hedges. For full year 2023, we have WAHA basis swaps in place for 67,500 MMBtu of gas at a weighted average price of minus $1.25. As a result, we estimate in 2023, only one-third of our natural gas production will be exposed to WAHA pricing, with the remainder being protected by Houston Ship Channel pricing and basis hedges. Overall, we believe our existing midstream agreements provide for advantaged pricing and flow assurance during periods of potential weakness next year. And we look forward to continuing to find ways to further enhance pricing over time. As you can probably tell, we are excited about where the business stands today and feel like we have significant momentum as we head into next year. We are well positioned to generate robust free cash flow and deliver significant returns to shareholders in nearly any commodity price environment. Turning to Slide 5. As George highlighted, we look forward to paying our first quarterly base dividend less than 3 months after closing the merger, further reiterating our commitment to shareholder returns. The $0.05 per share base dividend represents an annualized yield of 1.8%, which is competitive with our large-cap peers and the S&P 500. We view paying this first dividend as a key milestone for the combined business and are committed to sustainably growing this base dividend over time as we execute our long-term strategy. In addition to our base dividend, we previously announced a variable return program, whereby we will return an additional 50% of the free cash flow remaining after deducting the base dividend. This variable program is described in further detail on Slide 6, but in summary, at the end of each quarter, we will evaluate free cash flow generated during the quarter, any buybacks completed during the quarter and then true up investors with a variable dividend to ensure the minimum payout of 50% is achieved. After careful deliberation, we ultimately decided a payout ratio of 50% as we felt that it provided the right balance between shareholder returns and strategic flexibility for a company of our size. Our investors can rest assured that we will be thoughtful allocators of this excess free cash flow, and we pride ourselves on a strong history of successful capital allocation and outsized equity value creation. As significant owners of the business, our management team is highly aligned with shareholders and laser-focused on creating long-term value. I'd like to quickly wrap up on Slide 12. In summary, we believe that Permian Resources represents a unique investment opportunity as a true mid-cap exploration and production company that has both the scale to be relevant to institutional investors and the asset qualities to compete with the larger independents. The company's robust shareholder return program is underpinned by its high-quality asset base, long-dated inventory life and fortress balance sheet. Given these attributes, we are confident that Permian Resources has all the characteristics to sell in today's market and drive outsized value creation for our shareholders across commodity cycles. Thank you for listening today, and now we will turn it back to the operator for Q&A.

Our first question comes from Zach Parham with JPMorgan.

Congrats on your first quarter as a combined company. In the release and in your prepared remarks, you mentioned the spud-to-TD times of 8 days and 12 days in the Second, Third Bone Springs in Eddy County. Can you talk a little bit more about the drivers of those efficiency gains? And maybe give us some color on how fast Colgate was drilling wells in the area prior to the merger?

Yes, sure, Zach. This is Will. I'd say those 2 were kind of the standout best wells of the quarter. Kind of I'd say the average for Colgate are going to be 3 or 4 days slower than that, kind of respectively, to each zone, so call it 10 to 12 days in the Second and closer to 16 in the Third Bone Spring, so quite a bit of improvement. And I'd note that these are changes that we could make day one, changes with the BHA, changes with drilling parameters, kind of changes that don't require long lead times. There's still kind of a slew of changes that are on the come that require kind of more changes with surface equipment, kind of further integrating, off-line cementing and things like that. So I'd say as we look at the team and what they're doing already, they're really just getting started.

Got it. And then maybe just one on the marketing side. Could you give us a little more color on the natural gas contract you signed? What's the duration of the contract? And James, I know you mentioned the $20 million uplift in free cash flow at the current strip. But do you have any color on how that contract will impact cost or price realizations specifically?

Yes. The contract we revised will extend through 2026. Overall, I believe it will increase our realizations next year for the gas covered by that contract by between $1 and $1.50. This represents a notable improvement next year, considering the current basis.

Our next question comes from Neal Dingmann with Truist.

My first question is about your planned activities to achieve the 2023 estimate. I think you're indicating about 1.50 to 1.65. Will, do you believe most of that activity for next year will be primarily developmental? If that's the case, could you share your thoughts on the potential for further efficiencies compared to the likelihood of ongoing OFS inflation?

Yes, I would say that our 2023 plan is primarily developmental, focusing on areas where we already have operations. We are fully confident in this plan and plan to return to these areas to drill, where we expect positive results. Regarding efficiencies, we anticipate reducing the number of rigs from seven to six throughout the year. To meet our well counts with six rigs in the latter half of the year, we will need to enhance our efficiencies. From what I have observed in the two months since closing, I am very optimistic about achieving those efficiencies, though it is uncertain when we will realize them.

No, that's great to hear. And then my second, maybe just on top of your shareholder return and capital allocation, specifically maybe James for you or George, if you have the opportunity to participate in buybacks of any potential equity owner sales, would you all consider that or if you did that part of the 50% payout for that particular period? Or would you still consider paying out 50%-plus with a variable and potentially other buybacks on top of that? And I guess I'm just wondering if you had an opportunity to buy back some of this private, would you consider using a revolver to repurchase those shares if it still meant keeping the leverage around 1x.

Yes. No, great question, Neal. I think to answer your first part of the question is absolutely. I'd say we've said time and again that we plan to be opportunistic with the share buyback program. And I think participating alongside a sponsor sell-down is a great way to use the buyback. I think we've been pretty clear with the market that we expect sponsors to have an orderly and kind of thoughtful exit, and I think us playing a role in that is really, really key. I'd say with regards to kind of do we view that as incremental, I'd say as a base case, we would view that as part of an ordinary course share buyback, which would kind of go into the 50%. But I'd say as we've messaged it to date, it's at least 50%, and I'd say any incremental returns beyond that are going to be dependent on kind of market conditions at the time and what other opportunities look like. But I don't think we view any real constraints there beyond that and are excited to get aggressive on the buybacks if the opportunities are there.

Our next question for today comes from Leo Mariani with MKM Partners.

Wanted to follow up quickly on the gas deal. Just a couple of more details looking for here. So does that begin like January 1, 2023? Is there any benefit in the fourth quarter of 2022? And then additionally, you spoke about kind of roughly $1 to $1.50 uplift on your gas price realization next year. Wanted to see if there's some corresponding increase in general, property, and transfer expense that potentially would come along with that as well here?

Yes. That revision took effect on November 1 of this year, so it was just nine days ago. The way the contract works is that we sell the gas at the wellhead, which means you'll see a deduction in revenue. At a high level, if WAHA pricing is $2 below the hub, we incur an additional cost of about $0.50 to $0.60 due to extra fees and fuel required to transport that gas to Houston. This leads to an uplift of approximately $1.25 to $1.30. Does that address your question?

Yes. Helpful for sure. And I guess just wanted to dive into the buyback a little bit more here. Just wanted to get a sense if that's something we could see in the next couple of quarters as we work our way into fourth quarter and first quarter next year. Or do you guys think that really the focus is on knocking down this revolver as quickly as possible over the next couple of quarters? And it's really something that might kind of kick in more kind of midyear next year?

Yes. I mean, I think the buyback authorization is in place today. I think to the degree there were to be a sponsor looking to sell down, I think I could see us participating on the sooner end of that. But I think absent that opportunity, I think kind of this quarter is probably focused on using that incremental free cash flow elsewhere.

The next question comes from John Annis with Stifel.

Congrats on initiating the dividend. For my first question, you reiterated capital guidance at a time when peers are experiencing inflationary pressures above expectations. Could you speak to some of the self-help initiatives that have enabled you to hold your CapEx guide and other levers you have to maintain your capital efficiency?

Yes. No, I think a big part of that is we put out this guidance kind of early September in a market that looks a lot like I think where the market is today. So I think there's a little bit of a difference there just from a timing perspective, and then I'll let Will hit to the operational side.

Yes, I would say that on the operational front, we have set some ambitious synergy targets and have worked diligently towards them. From the time of our announcement until the closing, we spent several months with the teams to formulate a plan and ensure we understood the key actions we would take on September 1. That plan is now materializing rapidly. In the two months following the closing, it seems we are indeed benefiting from the strengths of both Colgate and Centennial, and we are seeing results swiftly. This gives us confidence that we will meet the targets we established.

Got it. That makes sense. And then for my follow-up, turning to Slide 6. You're forecasting $1.1 billion of free cash flow in 2023. And with the $600 million slated for shareholder returns, in your leverage within your long-term target range, how are you thinking about the use of excess free cash flow?

So I think we really value the flexibility there. And obviously, there's a lot of things we could do with that. And I'd say kind of as we get further along into this quarter and then into next year, I'd say we'll be evaluating what the opportunity set looks like. And that could be anything from continuing to repay the outstanding borrowings on the revolver. That's probably the first thing that we're doing kind of this month. But also kind of comparing the opportunity cost of that with other opportunities, strategic acquisitions, further shareholder returns, et cetera. And from our perspective, we're going to always use that capital in what way we think drives the most equity value creation for our shareholders.

The next question comes from Oliver Huang with Tudor, Pickering, Holt & Co.

Congrats on a solid quarter. First off, just wanted to ask, we've seen some of your peers run into some issues on both supply chain and labor fronts or kind of talk about it. Was hoping that you all might be able to speak a bit more on certain things that you all are doing behind the scenes to kind of mitigate this risk.

Sure, Oliver. I'm glad you asked that question, and it gives me a chance to acknowledge our team. It's truly remarkable that they managed to complete this merger and integrate the two companies while maintaining our operations seamlessly. It's important to note that with this merger, we did not take on any additional activity. We operated the same eight rigs that we had for most of Q3 and the three frac fleets from the predecessor companies before the deal. We were fortunate that both companies had already secured the necessary sand volumes, water, casing, and other resources to meet our plan. This showcases that both Colgate and Centennial were well-prepared and had procured everything needed to operate effectively before the merger. Now, we're beginning to see the advantages of the merger, particularly in incorporating best practices throughout the business. I hope this quarter is just one of many, and you will continue to see our strong execution moving forward.

Awesome. And for a second question, just from an operational perspective, could you all talk about the progression of pad sizing and even lateral lengths from the current 9,000-foot level moving forward, just kind of considering a large portion of the Colgate acreage is still a highly undeveloped and virgin fairway and should allow for this?

Yes. No, that's a great question. I'd say from a lateral length perspective, the 9,000, we kind of feel like Delaware Basin optimal lateral length is right at that, call it, 10,000-foot lateral length level. So the 9,000 we're drilling over the course of '23 is a mix of heavily weighted towards 2-mile laterals with a few mile-and-a-halfs sprinkled in there. And that's probably about where we'll be, kind of 9,000 to 9,500 trying to target that optimal lateral length, we think, in the Delaware Basin of a 2-mile lateral. And then from a pad size perspective, we're very fortunate that kind of with the combined size and scale of this business, that we have the flexibility to scale pad sizes as needed to optimally develop our assets. I think what you'll see is it's quite a range of pad sizes. There are some areas where we're very fortunate that kind of the benches that we're targeting in '23 are thousands of feet of vertical separation away from other well packages and have good frac barriers in between. And as such, we can develop them with kind of smaller pad sizes, call it 3, 4, 5 well pads. And then we have plenty of pads in other areas where we feel the need to have a large-scale pad to most efficiently develop the asset. And in that case, there's plenty of pads in the '23 program that are kind of 10 or more. So it's a mix but I think we feel really good, both that the pad sizes we're targeting going forward are not that different from what we have done backward looking and that we've got kind of the financial flexibility to kind of execute on the right pad size for the assets.

The next question comes from Geoff Jay with Daniel Energy Partners.

I have a quick question about your current scale following the deal. I know there’s a lot to consider, but how are you thinking about consolidation opportunities in Delaware? What is your roadmap looking like for the next couple of years?

Yes, Geoff, good question. I think we feel really good about the kind of business that we have today, kind of asset quality, return to capital scale. So I'd say we don't feel any pressure to do anything. We've got an incredible business and incredible path forward to equity value creation. But I'd say we do have a really strong track record of accretive M&A and are constantly evaluating the market. And don't see anything in the immediate term, but if there were ways we could do deals to really make a better business and drive accretive shareholder value creation, we'd be open to that. I'd say with regards to scale, I mean, I think there's definitely, today, some correlation, if not a pretty direct one between scale and kind of how businesses trade. But I think a large part of that is quality. And we really believe with the business that we've got today that ultimately, we can rerate with the size that we have today, where we do have the asset quality of the larger-cap independents. We've got the return of capital of the larger-cap independents. We've got the balance sheet of the larger-cap independents. So I think really from us is no pressure to do anything. We really like the business we have today. But if we had opportunities to make that business better, we'd be open to them.

As we see no further questions, this concludes the question-and-answer session. I would like to turn the conference back over to James Walter for any closing remarks.

Thank you to everyone who participated in listening to Permian Resources' first official investor call. We look forward to everyone tuning back in, in February when we announce Q4 results, which will be the first full quarter operating as Permian Resources. We're really excited about everything we are doing out here in the Permian and look forward to building long-term relationships with our investors and a track record of outsized value creation. Thank you again, everyone, for your time.

The conference has now concluded. Thank you for attending today's presentation. You may all now disconnect.