Permian Resources Corp Q4 FY2024 Earnings Call

Good morning. And welcome to Permian Resources Corporation's conference call to discuss its fourth quarter and full year 2024 earnings. Today's call is being recorded. A replay of the call will be accessible until March 6, 2025, by dialing 888-660-6264 and entering the replay access code 750775050 or by visiting the company's website at www.permianresources.com. At this time, I will turn the call over to Hays Mabry, Permian Resources Corporation's Vice President of Investor Relations, for some opening remarks. Please go ahead.

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

We are excited to discuss our fourth quarter results as well as lay out our 2025 plan this morning. We reported a record quarter in both production and free cash flow per share in Q4, demonstrating that the business continues to perform extremely well, led by outstanding execution in the field. Additionally, we saw a relentless focus on cost control manifest into lower D&C cost and lower controllable cash cost when compared to Q3. Over the full year of 2024, our team delivered outstanding results, resulting in a nearly 50% increase compared to 2023. Even more impressive, we achieved this without increasing leverage, reflecting the strength and consistency of our core operations. As a result, we believe 2024 represents a highly repeatable year, positioning us for sustained performance and growth. As we look to 2025, we expect to continue maximizing shareholder value by executing on our highly capital-efficient Delaware Basin drilling program. I'm proud to lay out a 2025 plan expected to continue to generate significant free cash flow per share growth. Moving into quarterly results, Q4 production exceeded expectations with oil production of 171,000 barrels of oil per day and total production of 368,000 barrels of oil equivalent per day. The D&C team also continues to execute at an extremely high level, which led to 275 wells drilled in 2024. Importantly, we executed on this plan with CapEx remaining well within our original guidance range of $1.9 billion to $2.1 billion. In addition, we delivered leading cash costs supporting strong margins, with Q4 LOE of $5.42 per BOE, cash G&A of $0.93 per BOE, and GP&T of $1.49 per BOE. Strong production results paired with low cash costs and CapEx of $504 million in the quarter resulted in adjusted operating cash flow of $904 million and adjusted free cash flow of $400 million. Turning to slide four, we wanted to provide a quick review of how strong a year 2024 was for Permian Resources Corporation. We were able to beat and/or raise production guidance every quarter on just the base outperform. When including the bolt-on acquisitions we closed throughout the year, we delivered 8% higher oil production compared to our original 2024 guidance. Our cost controls also performed extremely well as most recent well costs were almost 20% lower compared to 2023. Most importantly, a little over half of this reduction was a direct result of structural efficiency improvements gained throughout the year. The balance was a result of service cost deflation. We also rolled out an enhanced capital return program during 2024 that prioritizes a leading base dividend for our shareholders. This change is underpinned by the material improvements in free cash flow per share generation of our business, which we will touch on more in just a little bit. Lastly, during 2024, we were able to increase our liquidity by approximately $1 billion, showcasing our ability to maintain a very strong financial position with no change in leverage while executing on $1.2 billion of accretive M&A. We have and will continue to prioritize maintaining a fortress balance sheet as we believe this allows us to maintain flexibility and be opportunistic through the commodity price cycles. Slide five illustrates our expertise and cost leadership in the Delaware Basin. Our relentless focus on low-cost leadership allows us to drive both D&C and controllable cash cost to peer-leading levels. The 2025 plan, which James will outline here in a minute, benefits greatly from the reduction in all-in costs we have seen over the past year. Given the marginal nature of free cash flow, running a low-cost business is critical in supporting strong free cash flow per share. Turning to slide six, we want to highlight the success of our 2024 M&A program. We executed on approximately $1.2 billion of acquisitions for 50,000 net acres and about 20,000 barrels of oil equivalent per day across our acreage position. The mix of acquisitions consisted of a large asset deal in Bria Draw, several smaller bolt-on acquisitions, and finally a substantial ground game that consisted of over 500 transactions for 4,000 net acres. We believe that expertise in executing each of these types of transactions provides Permian Resources Corporation the means to continue to replace our drill locations with high rate of return inventory that immediately competes for capital. As you can see, these acquisitions more than replace the inventory that we drilled throughout 2024 with similar or better rates of return to our 2024 development. We plan on continuing our strong track record of pursuing accretive M&A that adds near-term, mid-term, and long-term value to shareholders. Now looking at slide seven, we want to highlight a big reason for why we have been so successful at M&A that creates value for shareholders. One of our sustainable competitive advantages is our ability to buy acreage in areas where we can apply Permian Resources Corporation's leading cost structure to the acquired assets immediately. Specifically, when we compared the last seven months of LOE on assets prior to acquisition, we have already driven a $3 per BOE reduction at the asset base. This is largely achieved through our lean field organization, technical expertise in artificial lift, optimized chemical programs, and a leading field compression team that maximizes production while reducing downtime. Similarly, on the D&C side, we have reduced costs by over $300 per lateral foot when compared to the prior operator's most recent wells. Our leading cycle times, completion optimization, and sourcing of key materials with scale support these improvements. We are confident that our ability to execute at this level will allow us to continue to find Delaware Basin opportunities and attractive returns. That, I will turn it over to James to go over our 2025 plans.

Thanks, Will. Turn to slide eight where I discuss our 2025 business plan. It is focused on maximizing returns and free cash flow per share through consistent, thoughtful capital allocation and low-cost execution. Our plan is a result of a tremendous amount of effort from every department of Permian Resources Corporation. I want to thank our entire team for the hard work that went into pulling this all together. For the full year 2025, we expect total production to average between 300,000 and 380,000 BOE per day. Oil production is expected to average between 170,000 and 175,000 barrels of oil per day. This plan delivers 8% higher annual oil production compared to the full year 2024. Our capital program consists of approximately $2 billion, which is less than 2024 despite the higher production base, showing materially improved capital efficiency year over year. Eighty percent of the capital program is allocated to drilling and completion operations, where we expect the turn line—wells turned to sales—to approximate 85 wells this year, roughly the same turned inventory as we carried in 2024. The remaining 20% is primarily investments in infrastructure that position Permian Resources Corporation to continue to drive value in 2025 and beyond. Our development program in the Delaware will be largely the same as last year. We will continue to be focused on our high-returning Delaware Basin asset, with New Mexico accounting for about 65% of our activity, the Texas Delaware accounting for about 30%, and the Midland Basin getting the balance. We expect our average working interest to be approximately 75%, which is in line with 2024, and our average lateral length to increase to approximately 10,000 feet. We expect our controllable cash cost to be approximately $7.75 per BOE. As we mentioned earlier, we believe this to be the lowest cost in the Permian. Additionally, we have continued to optimize our tax planning strategies and expect approximately $25 million in current taxes for 2025 at strip prices. The combination of the same or better well productivity with lower costs across the board drives meaningfully improved capital efficiency and lower breakevens in 2025. Turning to slide nine, our balance sheet reflects the same pull around low leverage and high liquidity we have shown since the founding of our predecessor company. We maintained leverage right at one times through the course of 2024 while doing $1.2 billion in acquisitions. We expect to exit 2025 at approximately 0.5 times leverage, assuming current strip prices. As mentioned earlier, we exit the year with $3 billion in liquidity, including approximately $500 million in cash. This positions us to be opportunistic in any environment as we believe market dislocations represent some of the greatest value creation opportunities in this sector. We have also protected our downside through hedging, with approximately 25% of our crude oil hedged at $73, strong oil and gas hedges for the next few years. The next strategic priority for our balance sheet is the achievement of investment-grade status, which we think could come before the end of the year given our consistent conservative financial policies and lower leverage than many of our investment-grade peers. We paid our first $0.15 per share base dividend in November; our current base dividend yield is over 4%, highlighting the relative value that Permian Resources Corporation stock represents today. Importantly, the improvement of business fundamentals we have highlighted throughout the deck has driven our post-dividend free cash flow breakeven down to approximately $40, which highlights the sustainability of our plan. Turning to slide ten, we wanted to go back to 2023 to highlight some of the performance metrics that have helped drive the outsized investor returns we will highlight on the following slide. As most of you know, our sole focus is creating value on a per-share basis. Our teams have positioned us to deliver substantial period growth on key per-share metrics like production per share and free cash flow per share. From 2023 to 2025, we will grow production per debt-adjusted share by approximately 50% and reduce our cost structure in a material way during that same time period. The end result is our free cash flow per share almost doubles from just over $1 per share in 2023 to over $2 per share in 2025. Slide eleven shows the public results of the improvements to our business we had on slide ten. Our team's tireless focus on value creation and free cash flow per share growth has led to best-in-class total shareholder returns every year since the COVID-related consolidation in 2020. As you can see, turning to slide twelve, the majority of the shareholder value has come from improvements in the quality of our business rather than a rerating of our multiple. Even with our industry-leading PSR the past two years, we believe that Permian Resources Corporation is well-positioned to continue to create outside value for investors. Our go-forward value creation potential is underpinned by an industry-leading cost structure, low breakevens, and long-dated higher return inventory, which together have driven leading returns for investors. Thank you for tuning in today, and now we will turn it back to the operator for Q&A.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. You will hear a prompt that your hand has been raised. And should you wish to cancel the request, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from the line of Scott Hanold from RBC Capital Markets. Please go ahead.

Thanks. Good morning. You discussed a little bit about your plan in 2025 and a lot of regional similarities. Can you give a little color around the target formations and co-development that provide you confidence in the sustainability of the economics as you move forward and what is your visibility on that right now in terms of duration?

It is shockingly similar both in allocation across states, basins, and zones. Average pad size may creep up a little bit as some of the wells we're drilling are set up for larger scale development, but it is largely the same zones in New Mexico, Texas, and the Midland Basin that we have developed in previous years. Our inventory position has not changed. As we discussed on the M&A slides, we have been able to replace everything we have drilled for two years in a row. We still sit with a high-confidence fifteen-year inventory with the first half of that showing very little degradation from what we are doing today.

That is great. That leads to my next question on the M&A strategy going forward. As you replace inventory with similar quality assets, what is your view on larger scale M&A? It seems the trend in the sector is to get bigger deals to enhance scale and duration. When you look at larger deals in the Delaware, how much is left that could be targets?

I think the M&A landscape overall looks pretty interesting and attractive heading into 2025. It resembles the last couple of years and the pre-COVID period, which have been fruitful for those who can find and execute the right deals. In terms of scale, we've focused more on smaller deals. The biggest cash deal we did was the Briar Draw deal we announced in Q3. We find these deals tend to have higher quality inventory and present better values. The larger deals we've seen, especially on the private side in the Delaware, tended to be production heavy and not as long-lived on inventory. So our focus has been on smaller deals, the hundreds of millions of dollars and smaller. We would be happy to look at bigger deals; we've reviewed quite a few, and if we found the right fit—right quality that truly makes our business better over the long term—we would be excited to do something bigger. But we see more value on the smaller end and will look at everything the market brings.

Appreciate that. Thank you.

Thank you. And your next question comes from the line of Neal Dingmann from Truist Securities. Please go ahead.

Hi, Will. Thanks for the time. My first question is around the operational efficiency trend. Is part of this driven by the continued integration of new assets, or what continues to be the driver when you are able to improve quarter to quarter?

It is really the culture we've built here. We have a highly motivated, highly skilled team working every day to improve on what they did the quarter before. M&A allows us to showcase and leverage our cost structure by buying deals at high rates of return and applying our structure immediately, often realizing synergies as quickly as the first month after acquisition. But M&A does not make us better at our core; it gives us scale and purchasing power. Day-to-day gains come from grinding on the drilling side and optimizing completions to lower cost. Being hyper-focused on one basin—primarily the Delaware—also provides a lot of value. That combination of culture and focus drives the performance.

Great point. Thanks, Will. James, on shareholder return: many investors like me hoped for a larger dividend. How are you thinking about shareholder returns this year? What is appropriate given free cash flow capacity?

The base dividend is the core of our shareholder returns program. We paid our first $0.15 per share base dividend in November and are excited about that. We like the strong dividend yield as it feels sustainable, and as I mentioned on the call, a post-dividend free cash flow breakeven of about $40 feels very good. Our number one goal is to continue to increase the base dividend on an annual basis; we believe that is a key criterion of a healthy, high-quality, growing business. Beyond the base dividend, capital allocation depends on the opportunity set. Recently we've put cash on the balance sheet and paid down debt. Over time, we may opportunistically pursue buybacks or strategic acquisitions. We make decisions daily on what will drive the highest return for shareholders; that's how any excess cash will be allocated.

Okay. Love the answer. Well done, guys. Thank you.

Thank you. And your next question comes from the line of Gabe Daoud from Cowen. Please go ahead.

Thanks. Good morning. A couple of items on CapEx. First, the level of facility spend is about $400 million on an absolute basis. Is that a good number to use annually on a go-forward basis? Second, your D&C per foot target of $7.50 per foot: are you there now, or is that a level you expect to get to at some point this year?

Facilities: around $400 million, maybe slightly above, is where we think we'll be this year. That is about $100 million below 2024, where there was a lot of one-time spend associated with the Earthstone integration. If we do no acquisitions and continue developing our own inventory, three to four years out you could see that drop further, perhaps to around $300 million a year. But given our history, some acquisitions are likely. On D&C, $7.50 per foot is cutting-edge real-time cost today. We are there now. We have confidence based on real-time field results that $7.50 is achievable, and we are currently at that level.

Okay. So it would be fair to say you could probably move that lower as we move throughout the year?

I trust the team will continue to find ways to improve, but service deflation may be less obvious going forward. $7.50 is the right guide based on where we stand today, and we hope to find ways to cut costs further, though it's not as clear as it was a year ago.

Understood. One quick follow-up: given a pretty static level of equipment and activity relative to where you were, is there any lumpiness in the program this year?

There is a little lumpiness. CapEx is slightly front-half weighted, and production is slightly back-half weighted. Production is probably on the low end of the guide in the first half and the high end in the back half. CapEx could move a couple percent to the first half and drop a couple percent in the back half; nothing too meaningful, though.

Got it. Thanks, guys.

Thank you. And your next question comes from the line of Zach Parham from JPMorgan. Please go ahead.

Good morning. Following up on D&C cost: you're at $7.50 per foot now, down over $100 per foot from where you were coming into 2024. Can you detail the drivers of that reduction—how much is efficiency gains versus cost reductions?

High level, slightly over 50%, maybe 55%, of the improvement comes from efficiency gains, and the balance is per-unit cost deflation. On the efficiency side, it's drilling-weighted: we've continued to cut drilling days in both the Delaware and Midland basins. Drilling days directly affect dollars—spread rates are roughly $900,000 per day on a gross basis per well. On the material side, tangible items like stands and casings are down, and there's some service deflation. SimulFract helped a bit. Adding all that together gets you to the numbers you're quoting.

Got it. Thanks. Quick update on the Midland asset and how it fits in the portfolio long term. It looks like about 5% of activity this year; how are you thinking about it?

We are very focused on the Delaware Basin—that's where we've spent most of our time and capital. The Midland asset has turned out to be a solid addition. Our team has done a very good job bringing costs in line with leading operators in the Midland Basin. When we acquired the asset a couple of years ago it was in fine shape; we've applied our operating model and improved it. It's not a primary focus, but it fits well in the portfolio. It provides a nice cash flow stream and real gas-price optionality. Permian gas prices haven't been attractive, but the asset has leverage to end-basin gas pricing, which makes it more attractive to hold. If an opportunity arises to optimize the position, we're open, but we're happy with it in the portfolio today.

Got it. Thanks, guys.

Thank you. And your next question comes from the line of Kevin McCurdy from Pickering Energy Partners. Please go ahead.

Hi, guys. It looks like you are taking efficiency gains and shorter cycle times from 2024 and using them to increase turning lines year over year. That differs from peers who are banking efficiencies and keeping production flat. Can you share your thought process on activity levels and how you reached this decision?

When making capital allocation decisions for drilling, we look at the all-in return and payback. If you add an incremental rig, how fast does it pay for itself and improve net cash position? Over the last nine to twelve months, commodity prices moved against us, but our cost structure more than offset that and improved pad-level returns compared to a year ago. The 2025 plan is a tweener program—8% growth year over year—with plenty of acquisitions included. From Q4 levels, growth is less than 8% organically, and we could dial it up or down. We focus on per-share growth: production per debt-adjusted share is targeted at 11% year over year, which feels healthy for the business and suits the macro environment.

Thanks. And a follow-up on minimal cash taxes in 2025: how are you able to mitigate taxes again this year and how long can you defer the majority of your cash taxes?

For 2024, we optimized our tax planning and learned a lot with Earthstone, which resulted in nominal cash taxes paid in 2024. The improvements carry into 2025. As we go forward, cash taxes will become more meaningful in 2026 and by 2027 you'll be closer to a full cash taxpayer. We're working through that planning now, so 2025 is a meaningful improvement relative to what we thought six to nine months ago.

Appreciate that. Thank you, guys.

Thank you. Your next question comes from the line of Derrick Whitfield from Stifel. Please go ahead.

Good morning, and thanks for taking my questions. Over the last two quarters, you added 2,500 net acres via grassroots leasing, mostly in Q4. Looking forward across your expanded position, is it reasonable to expect you could continue to add 5,000 to 10,000 acres per year via grassroots leasing, reducing the need for larger bulk buys?

High end of that sounds high. We are confident—we've been doing this a long time and it is lumpy. We could replicate what we did in Q4 in a couple more quarters in a full year, but a better base case is probably 4,000 to 6,000 net acres per year. Ten thousand would be a really good year. These deals are tied to the drill bit and our schedule, so you can have outsized quarters like Q4 but not every year. We have an incredible ground team in Midland that finds opportunities, so a very good year could hit that 10,000, but probably not every year.

Makes sense. For a follow-up, a peer introduced a measure evaluating what 2025 price would allow for similar free cash flow per share as 2024. Do you have a view on what crude price would deliver a similar level of free cash flow per share for you in 2025?

We like looking at that kind of measure. Ultimately, free cash flow per share is the arbiter of quality. If we were trying to generate the same absolute free cash flow as last year—around $1.4 billion at roughly $75 crude—we think we could do that this year in the low- to mid-sixties per barrel, call it around $63 plus or minus. That highlights the quality of the business and the step change in operational and capital efficiencies.

Great update. Thanks for your time.

Thank you. And your next question comes from the line of Neil Mehta from Goldman Sachs. Please go ahead.

Good morning, Will and James and team. The stock still trades at a two-turn discount to many peers despite multiyear outperformance. What do you think the market needs to better understand to start valuing Permian Resources Corporation more in line with other pure-play Permian stories?

We don't spend much time guessing market perception; we focus on making the business better. If I had to speculate, Permian Resources is still a relatively new story—about two and a half years—while some peers have been executing for well over a decade. That tenure supports the multiple they have earned. We still need more investors and more time to build trust. Over time, as people see consistent execution quarter after quarter and year after year, the multiple uplift will come. Sometimes investors struggle to reconcile our strong outperformance with a still relatively low multiple. For us, the priority is to keep growing free cash flow per share; we believe valuation will follow execution.

Great answer. A follow-up on lateral lengths: you're moving from 9,300 feet to 10,000 feet. How do you continue to drive that higher and what is your approach to extending laterals?

This is driven by our acreage position. In the Delaware, deeper Wolfcamp benches have historically targeted two-mile laterals, which is often optimal. The step up from 9,300 to 10,000 feet reflects that we are drilling fewer sub-10,000-foot laterals this year and have some three-mile laterals in shallower benches where it improves economics. The big shift seen in the Midland Basin toward 12,500 feet may eventually translate to the Delaware, but there are differences: Delaware productivity tends to be more fluid-per-foot sensitive. If you push lateral lengths too far, fluid deliverability can constrain results and hurt economics. Our drilling team could drill 2.5- to 3-mile laterals if needed; it's a question of whether it makes economic sense given the acreage and productivity.

Okay. Thanks, Will.

Thank you. And your next question comes from the line of Oliver Huang from TD. Please go ahead.

Good morning, James, Will and team. On the 2025 budget, the non-D&C portion at 20% sounds like most of that is facilities and infrastructure. Any color on the magnitude of non-op CapEx within that budget?

Non-operated spend is pretty small. We've done a great job focusing on our operated business. I'd say non-op is less than $50 million a year.

That makes sense. For a follow-up on gas realizations: last quarter you highlighted focusing on optimizing gas netbacks. Any progress updates there?

It's definitely a priority. Better marketing of hydrocarbons across the board is a focus. We improved crude realizations modestly versus prior guidance, and those incremental moves matter to free cash flow. On the gas side, our approach this year will look similar to last year. The real step change is likely in 2026 and beyond as we evaluate longer-haul deals and ways to access different markets than Waha. We have several initiatives that could allow access to different markets, but those take time. Gas realization optimization is at the top of our strategic priorities and should show up more in 2026 and 2027 than in 2025.

Perfect. Thanks for the time.

Thank you. And your next question comes from the line of Josh Silverstein from UBS. Please go ahead.

Good morning. You mentioned potentially getting the balance sheet to half a turn of leverage by year-end. Do you see a rerating benefit at that level, or does it make sense to stay closer to one times and use cash for buybacks and acquisitions?

We are not optimizing our balance sheet to chase a valuation. Having a stronger balance sheet positions the company to be opportunistic in downturns and to be aggressive if the right opportunity arises—be that buybacks, acquisitions, or other uses. We've been comfortable at one times leverage through much of our life cycle, including the last nine or ten years. Right now, the business is generating strong cash, so we will delever more quickly this year absent extra buybacks or acquisitions. There is no firm view that trading will be meaningfully better at 0.5 times compared to one times.

Got it. On royalties: you now have almost 90,000 net royalty acres. Are you targeting more royalty acreage? And how much drilling on royalty acreage will enhance returns?

We evaluate all acquisitions on all-in total return. Most acquisition dollars we've spent have been working interest. We look at a lot of royalty deals, but it's a competitive market. Our success has come from buying working interest packages that include royalties alongside them—like the Briar Draw deal. That's more likely to be the base case going forward. Regarding activity, we allocate capital to the highest rate-of-return development opportunities, which often have higher NRI packages. Our 2025 guidance implies an average working interest around 79% in our view, so we are allocating more capital to those higher-return, higher-NRI packages.

Sounds good. Thanks, guys.

Thank you. And your next question comes from the line of John Abbott from Wolfe Research. Please go ahead.

Good morning and thank you. On the cost per lateral foot at $7.50, to achieve further efficiencies from here, do you need technological change or are there other levers you can pull?

To further cut costs, there are smaller improvements—continued reductions in flat time on drilling, savings from recycled water and water sourcing, and other operational optimizations. Major step changes tend to come from technological breakthroughs, which we see occasionally—big step changes once every year or two. We saw one of those last year between Q1 and Q2. So continued small gains are possible, and larger jumps depend on technology or materials breakthroughs. That's why we set $7.50 as our guide.

Thanks. On CapEx versus production, do you prioritize letting efficiencies continue to compound or managing to a production number? Does it make sense to let efficiencies keep improving versus capping production?

It depends on market conditions and returns. Reinvestment rate drives production. Returns are strong even at lower strip prices given our improved cost structure. There's potential for oversupply as the year progresses, but our plan is a middle ground: low- to mid-single-digit organic growth, 8% overall when including acquisitions. We're focused on per-share growth: our debt-adjusted per-share production growth is 11% year over year, which feels right for our business in the current market. We'll continue to balance efficiencies and growth to maximize per-share value.

Appreciate it. Thank you.

Thank you. And your next question comes from the line of Leo Mariani from Roth Capital Partners. Please go ahead.

You mentioned the multiple being lower than peers and that you hope it corrects over time. Given strong free cash flow and an improved leverage profile, why not feather in more buyback now instead of waiting for larger dislocations?

Our buyback strategy is rifle-shot: we believe buybacks deliver greater value when executed during real dislocations or downturns. While we may be undervalued relative to peers, the market today is not truly dislocated. We think dollars are better spent on the balance sheet until a riper opportunity appears—one that allows us to perform a juicier buyback or pursue an accretive acquisition. Being patient should drive more shareholder value in the long term.

Okay. On controllable cash cost, you kicked it down in Q4 and expect further improvement in 2025. What were the Q4 drivers and what are you doing to reduce costs more in 2025? Is this scale or tangible initiatives?

One recent win was cutting costs quickly on assets we acquired; an asset we bought had LOE north of $10 per BOE and we reduced it into the $8 range within a few months. That provides tailwinds for comparing Q4 to 2025. Additionally, where we drill affects GP&T; lower GP&T year over year is more a function of where we're drilling than a structural change. We'll keep chipping away at controllable cash cost—industry-leading G&A, pushing LOE lower, and leveraging field optimization will protect margins and free cash flow per share.

Thank you.

Thank you. And your next question comes from the line of Paul Diamond from Citi. Please go ahead.

Good morning. On M&A, you suggested deals in the hundreds of millions range. Is that the go-forward opportunity set similar to Briar Draw or more on the high or low side?

We did acquisitions from very small to the size of Briar Draw. Last year we did an $800 million Briar Draw deal, a $200+ million deal in Eddy County, and several smaller deals. That range is a reasonable representation of potential outcomes: as big as a billion on the cash side and as small as tens of thousands on the grassroots side.

Understood. On the ground game since the Colgate/Continental merger, how has it evolved? Are ask spreads and negotiation times similar?

The ground game has been steady in effort; the main change is scale. Since the Colgate and Continental merger we went from running four to six rigs to twelve rigs, which doubled the opportunity set and negotiation activity. The relationships and boots-on-the-ground presence in Midland open up opportunities, and the cost structure has been steady for a long time.

Understood. Thanks for the clarity.

Thank you. And your next question comes from the line of Noah Hungness from Bank of America. Please go ahead.

First, on the base dividend: your capital program is more efficient, cash cost lower, and production higher. What was the reasoning behind keeping the base dividend flat when you announced results?

We paid our first $0.15 base dividend in November. It felt like the right status quo to keep it unchanged this quarter. We plan to revisit it annually and are excited to increase it over time. The business could support a larger dividend, and we'll likely revisit it this time next year for a potential increase, but we had just established it and only one quarter had passed.

Makes sense. Second, thoughts on creative drilling solutions like U-laterals—some peers have had success. Any thoughts on adopting those?

Our land position generally doesn't require U-laterals; coverage on our acreage allows two or more straight wells per pad. We have drilled three or four curved or candy-cane wells and will use them when it makes sense. Our drilling team has proven the technology works with very little incremental cost in the few times we've done it. When it's useful, we will deploy it, but we don't view it as a major, widespread efficiency lever for us because we don't have many inefficient places that require it.

Gotcha. Thank you very much.

Thank you. There are no further questions at this time. I will now hand the call back to Mr. James Walter for any closing remarks.

Thank you, and thanks everyone for dialing in today. We've gotten off to a great start for 2025. Our primary goal remains the same: maximize shareholder value over the long term. 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. Again, thanks to everyone for joining the call today and for following the Permian Resources Corporation story.

This concludes today's call. Thank you for participating. You may all disconnect.