Good morning, and welcome to Permian Resources Conference Call to Discuss its First Quarter 2025 Earnings. Today's call is being recorded. A replay of the call will be accessible until May 22, 2025 by dialing 888-660-6264 and entering the replay access code 27785 or by visiting the company's site at www.permianres.com. At this time, I will turn the call over to Hays Mabry, Permian Resources’ Vice President of Relations for some opening remarks. Please go ahead, sir.

Thanks, Angeline. Thank you all for joining us. On the call today are Will Hickey and James Walter, our 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 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, Hays. There is a lot we're excited to talk about today. We delivered another strong quarter, outperforming expectations by achieving the highest free cash flow per share in PR history of $0.54, driven by lower per unit cost and solid production performance. We did all this while strengthening the balance sheet with the highest liquidity, most cash and lowest leverage in PR history. All the work we've done to date has put us in an incredibly strong position, not just to navigate the current market but to capitalize on it. And we've used this strength to start executing our downturn playbook already with our first opportunistic share buyback and the announcement of a New Mexico bolt-on, both of which James will hit in more detail. Moving to Q1 performance, production exceeded expectations with oil production of 175,000 barrels per day and total production of 373,000 barrels of oil equivalent per day. Our strong production performance is mainly attributable to outperformance from our 2024 acquisitions, driven by artificial lift optimization and stronger-than-expected well performance. In addition to wins on the production side, our operations team continued to drive down costs. Compared to Q4, we reduced controllable cash cost by 4% and D&C cost by 3%, landing at $750 per foot for the quarter. Strong production performance and further extending our Delaware Basin cost leadership resulted in adjusted operating cash flow of $900 million and adjusted free cash flow of $460 million with $500 million of cash CapEx. Our outstanding operating performance and conservative financial strategy further enhanced our fortress balance sheet. During the quarter, robust free cash flow generation drove an increase in cash on the balance sheet from $479 million at year-end to approximately $700 million on March 31. We also redeemed $175 million in principal of the 9.78% high-interest legacy Earthstone notes which will save us approximately $17 million per year in reduced interest expenses. These actions reduced leverage from 1x at year-end to 0.8x at the end of Q1. We also highlight our updated credit ratings from BA1 from Moody's and BB+ from S&P. With Fitch already at BB+, we are one notch away from our investment-grade goal at all three rating agencies. And you'll see in this presentation, our credit metrics compare favorably to our investment-grade peers. When we started the predecessor company Colgate back in the 2015, 2016 downturn, we built the company on a strategy of being prepared to play offense in any market. That mindset has benefited us tremendously in previous downturns and remains a core part of PR's DNA today. While we've been executing on an accretive consolidation strategy, we've also been pulling every lever to make sure we are ready for the next downturn. Since year-end 2023, we have decreased leverage to 0.8x and increased liquidity to $3.2 billion, all while more than doubling the size of the business. Looking at our current hedge book, we have approximately 25% of 2025 oil production hedged at a price just above $73 per barrel. This hedging strategy allows PR to be more opportunistic during a downturn when investments can earn the highest return. In addition, our high-returning asset base and our ability to drive costs out of the business allows us to maximize cash return from every dollar invested. That's not just a talking point, it's material. At our current cost structure and consistent well performance, we can generate the same free cash flow this year if oil remains at $60 that we did last year at $75. Thanks to our strategy, our people and our relentless execution, PR is in the strongest position in company history to operate effectively and create value through a down market. With that, I'll turn it over to James to walk through our downturn strategy in more detail.

Thanks Will. We've discussed our views on balance sheet and cost leadership, but the third part of our strategy is opportunistically investing during the down cycle. If we step back for a second, we recognize that the oil and gas industry will always have volatility. And it is our belief that this volatility creates the potential for outsized value creation. We firmly believe that investments made during lower commodity prices drive greater long-term shareholder value. But to capitalize on that opportunity, you have to have both the balance sheet capacity and the willingness to deploy capital when it's natural reaction to pull back. During times like this, our goal is to buy the highest quality assets with long-dated low breakeven inventory in the bottom half of the commodity cycle, and we've recently done that in two ways. First, with our buyback of PR shares in early April and second with our New Mexico bolt-on we announced yesterday. Yesterday, we announced the $608 million bolt-on acquisition in New Mexico, directly offsetting and overlapping our existing acreage and operational footprint. This acquisition was entirely in Eddy and Lea Counties and consists of approximately 12 Boe a day, 13,300 net acres and 8,700 net royalty acres. The proximity of these assets to our legacy position will allow us to quickly and efficiently bring our peer-leading cost structure to bear on the newly acquired assets, further enhancing returns. This acquisition also adds over 100 new gross operated locations in our core operating areas that immediately compete for capital, while also materially increasing working interest in existing legacy PR units. In addition, the acquisition comes with another 4,500 non-op acres that provide the opportunity to leverage our highly effective ground game to maximize value through trades and further consolidation. The existing production has a lower decline than most acquisitions we have evaluated recently but what really differentiates these assets is the quality and duration of the inventory. Strong well productivity combined with high NRIs and low development costs, allow these acquired locations to breakeven as low as $30 per barrel. This combination of high-return investments and low declines will allow us to maintain production with just a 35% reinvestment rate over the long-term. We're excited about the opportunity to invest in our core operating areas at below mid-cycle prices and think the purchase price metrics reflect that value proposition. The $608 million purchase price implies an attractive value of approximately $12,500 per net acre and $6,000 per net royalty acre. This works out to about $2 million per net location, and all-in, we expect the deal to generate in excess of 5% free cash flow per share accretion in the near-term, midterm and long-term. We'd like to reiterate that we've been maintaining a very disciplined and consistent approach to M&A during our seven years as a private company and nearly three years as a public company. And as such, Slide 8 should be familiar to all of you. Given the high quality of our business today and specifically the depth of our low breakeven inventory, the bar is very high when it comes to potential acquisitions. But we are confident this acquisition exceeds all of our rigorous investment criteria. First, we acquired these assets at an attractive valuation where we are highly confident we can exceed our return thresholds. Second, this transaction is accretive to all key financial metrics. Third, this allows us to add very high-quality inventory that competes for capital immediately in areas that we know well. Fourth, we're able to execute this opportunity while maintaining our fortress balance sheet and expect it to exit the year with over $3 billion in liquidity and leverage below 1x. But finally and most importantly, we believe this transaction makes our business better and will increase free cash flow per share and returns to investors over the long-term. We have a very long and successful track record of M&A that creates value for our shareholders and are highly confident that this transaction builds upon that. Turning to Slide 9, we want to continue to emphasize that protecting the balance sheet is a key component of our long-term strategy. Pro forma for the New Mexico bolt-on our balance sheet remains strong at current prices with leverage less than 1x and a dividend breakeven of approximately $40, comparing very favorably to our historical metrics and our peers. We are confident we have the dry powder to continue to execute on acquisitions or share buybacks in scale if additional opportunities were to arise. The final piece of our downturn strategy is opportunistic share buybacks and we’ve been consistent and disciplined in our approach to buybacks since PR’s inception. What we want to accomplish with buybacks is to increase ownership in our business in a cost effective manner. To put it simply, we can buy back more shares with the same amount of money during a downturn when prices are lower. And in a volatile industry like ours, we are confident that the dislocations and opportunities will always present themselves over time. Having prepared accordingly, we execute buybacks immediately during the period of heightened volatility in early April. In a relatively small window, we bought 4.1 million shares at an average price of $10.52. We want to use buybacks as efficiently as possible and will be ready to lean in during the next clear market dislocation. We are very fortunate that our team’s focus on balance sheet strength has left us in a position to not treat buybacks or acquisitions as an either-or, but where we can execute on both in scale as opportunities present themselves in 2025 and beyond. Turning to Slide 11. We’re excited to roll out a revised plan where we project more production and lower CapEx than the original plan we rolled out in February. Our recent production outperformance allows us to reduce our capital budget by $50 million, while maintaining production at the high end of our guidance range. This reduction in CapEx will come from a combination of reductions in completion and drilling activity in the second half of the year. As such, we still expect Q2 to be the highest CapEx quarter of the year with a step down in CapEx in the second half. As we’ve outlined for the past several years, our reinvestment and capital allocation decisions are very dynamic and we adjust our plans to reflect the returns we anticipate in the coming environment. Our business remains highly flexible to react to the ever-changing macro and we will continue to monitor all of the moving pieces and adopt a plan that maximizes long-term shareholder value. We believe this strategy will position us to further our track record of outsized value creation for shareholders. Thank you for tuning in today. And now we will turn it back to the operator for Q&A.

Thank you. One moment please for your first question. Your first question comes from Neil Mehta with Goldman Sachs. Please go ahead.

Good morning, James, Guy, Will, and team. Just would love to build on your comments on the bolt-on in New Mexico. Just curious, how does this deal stack up against the recent deals that you’ve done as you think about what it brings to the table? And spend a little bit more time kind of fleshing out what you think might be underappreciated here?

Yeah. Neil, great question. We’re really excited about this deal, and I think it fits with exactly what we’re trying to do with our M&A strategy, which is to make our business better. And I think as the markets evolve, I think one of the hardest things to continue to find is inventory that competes with what we’ve already got in our base business. And I think that’s the best part about this deal. I think we love the low decline PDP base. I think I mentioned in my prepared remarks that the base declines here are lower than anything we’ve looked at in quite some time. But what we really like here is the higher weighting of the purchase price to inventory and the quality of that inventory. I think we haven’t seen deals that have break-evens in the low 30s like this in a little bit of time. And we’re really excited about what it does. And it really does compete for capital. I think we’ve got a great inventory base to build upon and this fits great with our stack.

And in terms of what do you think is underappreciated in the asset or from an operational standpoint, what’s got you excited about it?

Yes. I mean, this fits with what we’ve talked about for a while in our Parkway asset in Eddy County. I think what’s been underappreciated by the market about this area is that the overproductivity is strong. But I think what really differentiates this area from a rate of return perspective is just how low the cost structure is. I think what our teams are able to do in Parkway in Eddy County, we’re approaching Midland Basin level costs in what the team’s doing out there. And I think that really helps generate some of those outsized returns we referenced.

Awesome. And then the follow-up just on share repurchases. You guys were aggressive in terms of – following the early April sell-off and were able to pick up stock at a really good price. But just think about maybe talk about your capacity to continue to buy back stock here with shares certainly trading at a discounted valuation.

Yes. I mean, I think from our perspective, we have ample capacity to both pursue further acquisitions if the opportunities present themselves or to buy back shares in scale or really to do both. Like I said, we don’t think of it as an either-or proposition. But we’ve been very patient on the share buybacks and people have seen that over the last two and a half years and expect to continue to be patient. I’d say we started to dip our toe into the share buybacks that first week in April as we thought we could be at the beginning of a longer-term downturn. And I’d say kind of if the market kind of whips back to those levels or below that, we’d be kind of watching it and ready in the right environment. But I’d say it’s also there’s a lot that goes into the decision to purchase shares. It’s what does the balance sheet look like, what’s our take on the longer-term macro and what’s our broader opportunity set. So it’s not going to be a perfect pin-down formula. But I think what you’ll hear from us is we’re going to continue to watch the market, we’ll be patient and I think when we do see opportunities, you should expect us to hit them pretty aggressively.

Awesome. Thanks, guys.

Thank you.

Thank you. The next question comes from Kevin MacCurdy with Pickering Energy Partners. Please go ahead.

Hey, good morning, guys. Maybe to stick with the acquisition. Can you share anything on how this deal came about? Was this a process or negotiated deal? And then maybe where these assets fit into the development queue?

Yes, sure. So I mean, these are some assets we’ve had our eye on for a long time. I think we’ve been in some discussions with the sellers on a smaller scale going back several years. I’d say for us, this discussion’s probably been going on again in earnest for the last six to nine months; we had some conversations around potential trades, other ways to work together. Obviously, we’re two large players in the Permian that have a lot of respect for what the other ones are doing. But ultimately, this did morph into something that I would call a process and we’re able to reach a deal that makes sense for us. I think largely on the backs of our peer-leading cost structure. I think these assets were really interesting where a good chunk of the acreage was in existing Permian Resources units that were on the near-term drill schedule for us. So I think we had a nice competitive advantage there. And the newly acquired inventory competes for capital day one. I think we probably overallocated to some of these assets in the near term just given how low the break-evens are and how quick the payouts are.

Appreciate that. And then as a follow-up, I mean it looks like to us that production is trending better than expected to start the year. Any observations on what is driving that better production compared to original expectations?

Yeah. I tried to hit a little on my prepared remarks, but I’d say the majority of the Q1 outperformance is localized to two of the larger 2024 acquisitions we did. We’ve now had those under our wing with our operating practices for about three months and nine months respectively. And we’ve been able to swap out artificial lift and get our first larger pads drilled on both of them. And I think what we’ve been surprised by is that the performance was better than expected and some of the artificial lift swaps had a meaningful uplift in production. So I think these are the good assets that tend to outperform more often and we think that the deals we did in 2024 were on good assets and we’ve had enough time to get our hands around them. You saw the cost-cutting immediately, and now you're seeing the production uplift three to six months later.

Thank you and great quarter.

Thank you.

Thank you. The next question comes from John Freeman with Raymond James. Please go ahead.

Congrats on the acquisition. On the roughly one third of this bolt-on deal that’s not option, can you speak to the line of sight you got on being able to work some trades to increase your interest in the operated units?

Yes, sure. I mean I think with our existing footprint, we have meaningful overlap with every operator of scale in the Delaware Basin today, which is great. I'd say, we really do have active ongoing trade discussions with, I think, everyone who's relevant and active in the Delaware Basin. So as you take the roughly 4,500 non-op acres we've acquired here, that just fits right into the discussions that we're already having. And frankly, I think this should allow us to help optimize both the assets we’re newly acquiring as well as some of the legacy PR assets that we’ve been working to trade and consolidate. So I think that's a great component of the deal. And I think we also like some of the consolidation and buying opportunities around what may appear to be a non-op asset today, as this may very well not be a non-op when we unleash our land team and our business development team, which I think are the best in the business on growing some of those positions. A lot of what we underwrote is now bankers could very well end up being operated and not too much time.

Got it. And then can you speak to how you all think about the trade-offs when it comes to responding to a weaker oil price environment with reduced activity versus not wanting to slow down the efficiency gains and all the momentum that you all built up or sort of off-laying activity kind of up and down with the macro?

Yes. I mean I think at the very core, our development program and capital allocation through the drill bit is a very returns-focused equation. And that hasn't changed in response to the new commodity prices. I'd say, returns are obviously getting somewhat compressed given oil is down, however much you want to think, $15, $20 a barrel, but the returns of our program are extremely resilient. If you look at wellhead breakevens in the low 30s, corporate breakeven right around 40%. So we are still generating great returns to the drill bit. For us, I think what you see us doing this year is just given the overall macro backdrop, we've let the improvements in capital efficiency of the business accrue to less CapEx. And so that's why you see us as opposed to letting it accrue to production and kind of blowing out the high side of our original production guidance. I think where we're headed is we're going to hold the line on production and accrue to less CapEx for the year. Also, I think there's a we can thread the needle of doing this in a way where we maintain maximum flexibility with the ability to hit the gas pedal anytime between now and next year, early next year if we see things turn around. And similarly, we run our business with very few long-term contracts. So if we see things get worse from here, we are prepared and able to dial it back. It’s not a perfect equation, but it’s about the overall returns of the program and then maintaining flexibility to react to what’s been a volatile market.

Thanks guys, well done.

Thanks, John.

Thank you. The next question comes from Scott Hanold with RBC. Please go ahead.

Yes, hi, thanks. If I can build on John's question there. And just as you see, obviously, you talked about you're going to be tapering some of your activity in the back half of the year with that reduction, does that keep your volumes on a fairly stable rate into 2026? So sort of a question on how you're positioned heading into 2026 is the back half of the year is still a pretty good maintenance mode into the next year?

Yes, I think relative to where we were Q1 is fair. We're not going to exit the plan as it stands is not to exit Q4 at some meaningful decline from what we printed in Q1, if that's the question you're asking.

Yes. And I think as you think about 2026, our goal is to position ourselves to be able to, like we said, quickly react to what the environment looks like at that time. We've obviously never given 2026 guidance, but we want to be in position if the market is calling for it and returns are high enough, we could return to growth, which we've done really successfully in the last few years. And if it looks like something more flat, and if things really get worse, we would consider further reductions in activity. So I think our position heading into 2026 is one of flexibility where we can react to whatever the market looks like.

Got it. And just maybe your perspective on the broad M&A landscape. I mean you all have done a very good job over the last several years of not only doing a lot of ground game activity, but mid- to larger-sized transactions. In this environment, what are your real-time dealers telling you that's out there? And what do you think the market looks like, say, in the next six months if things are status quo from where they are today?

Yes. I mean I think kind of starting probably longer dated. I think we expect to continue to see opportunities like this size deal over the long term in the Delaware Basin. I think we've seen a ton of Permian consolidation in the last three years, a year of scale. And I think on the back of consolidation, historically, you've seen non-core asset sales come out of it. I think this probably fits that bill, and you'll see more of it. But I don't think we see anything like this coming down the pipeline in the next six months. I think the likeliest opportunities for PR in that shorter time period is really more of the ground game. We've had a really active ground game in the last several years. I actually think in a downturn like this, there's a potential for that activity to actually pick up as you have more motivated sellers. And I also think a big part of the ground game for us is we've got a lot bigger ground game footprint as we've mentioned on the call today, like a lot more chips to play with, a lot more areas to go focus on.

Appreciate the color. Thank you.

Thank you. The next question comes from Zach Parham with JPMorgan. Please go ahead.

Thanks for taking my question. Given the activity drops we've seen across the industry already, and there's probably more to come, can you talk about what you're seeing on the service cost side at this point? Have those started to move lower yet?

I'd say that, yes, they're just starting to move lower. Zach, exactly where it settles out, I think it's too early to say, but service providers are aware, and there are some that are taking a strategy if they'd like to kind of keep their market share and keep all their crews busy. With those, we're getting some price concessions, and there are others who are more drawing a hard line or they'd rather drop activity themselves as opposed to give price concessions. So exactly how it shakes out, I think it's to be determined, but there was a little bit left to get it feels like on that side, and we're starting to see it.

Thanks, Will. Next, I just wanted to ask on OpEx. You were in the lower half of the full year range in Q1, can you talk about what drove OpEx lower? And maybe give us some thoughts on how you expect OpEx to trend through the rest of the year?

Yes. We have, again, just integration of the deals we bought and kind of overall just good operating practices led to a good quarter. The biggest driver on the OpEx on a per BOE basis being down is just going to be the outperformance on the oil side, just the fixed cost nature of some of those LOE costs when you add more barrels; we just saw costs come down a little bit.

Thanks, Will.

Thank you. The next question comes from Gabe Daoud with TD Cowen. Please go ahead.

Thanks. Good morning, everyone. I appreciate all the prepared remarks so far. I was hoping we could go back to the acquisition. I was curious if you could just refresh us on some of the targets up there near and around the Parkway asset and what you guys are doing from a spacing standpoint up there?

Yes. I think kind of the primary zones we've been the most active in the last couple of years are the second Bone Spring Sand, third Bone Spring Sand, and the XY. That's kind of where the bulk of our activity has been and will be for the foreseeable future. I think I probably should have said this on one of the earlier questions. One of the other things that's underappreciated is there really is a lot more beyond just those zones as you move further north, and they may be a little further down the stack for us, but there are really good targets like the first Bone Spring Sand, the Harkey, which is a little more regional, but we've drilled a handful of good Harkey wells and then some of the deeper targets in the Wolfcamp. So I think it's an area that has a lot to continue to give, and we’re excited about what that looks like not just near term but long term.

Got it. Got it. Okay. Yes. No, that's great to hear. And then a follow-up also just sticking to that region. Could you maybe discuss what the gas processing capacity looks like around there? I know one of your providers is bringing on additional capacity pretty soon. But just curious if you can maybe speak to that as well?

Yes. And I'd say we've had no issues historically with gas processing capacity in the Delaware Basin. I think we've been really fortunate that we partnered up with some of the biggest and the best gas processors in both Lea and Eddy County. So I give kudos to those guys. They've been growing alongside us, spending capital prudently ahead of the drill bit that we've never had any processing or gas egress issues whatsoever and don’t anticipate having any going forward.

Okay. Great. Great to hear. Thanks, guys.

Thank you.

Thank you. The next question comes from Leo Mariani with ROTH. Please go ahead.

Hi, guys. Maybe just kind of sticking with the gas marketing side of the business here. I know you guys had brought on some more folks to try to kind of maximize the value of the gas molecules, just curious kind of where you are in that process? Have you seen any progress at this point? And obviously, a lot of players are talking about trying to participate with data center deals and things like that in the Permian. So just trying to get a sense of where you think PR could fit in?

Yes, Leo. Thanks. That's a great question. And I think kind of something I'd say more to come there. I'd say it's absolutely been a focus of ours the last six to nine months. I think we say a lot of times on calls like this that getting better prices for all of our molecules is a key part of our go-forward strategy. That's both kind of in-basin gas but also crude, and frankly, NGLs downstream as well. So we did a ton of work in the background, don't have a ton to share with you guys in specific updates this quarter. I think we are having the same call in August, and I expect to have some meaningful updates that could change our longer-term trajectory. But again, this stuff takes time. Thoughtfully kind of downstream marketing and maximizing the value of all your molecules is not something that gets done as quickly as maybe we'd like. But I think we've got a really good long-term plan and we should have more to share in the near term.

Okay. Appreciate that. And I guess just in terms of your comment about returns on the business being fairly similar in the $60 oil world to what they were a year ago in a $75 oil world. Can you provide a little bit more detail on the key quantifiable items around that statement on the returns?

Yes. I mean, the biggest driver by far is going to be just how much cost we put out of the business. If you follow from our previous earnings deck, what CapEx has done on a cost per foot basis is – I mean, we have meaningfully reduced CapEx per foot over the last 18 months. And I'd say that reduction almost by itself offsets the reduction in crude prices. So similar to just longer laterals, same well productivity on a per foot basis with significantly less cost, and you kind of add all those together and that will bridge the gap.

And kind of not the same degree of impact, but we continue to make really meaningful per unit improvements on controllable cash costs as well. And it's the kind of business where every penny adds up, and we think our team is really optimizing across the entire value chain.

Okay. So outside of cost, there hasn't been any kind of shift or anything to target certain zones or kind of wider spacing or anything like that. It's really been a cost issue as what I was getting at?

Yes. We said it a lot here. Price taking in it. We're doing the same thing this year we did last year as we did the year before and going to be doing the same thing next year and the year after that, it's kind of steady as it goes.

Thank you. The next question comes from John Annis with Texas Capital. Please go ahead.

Hey, good morning guys and congrats on the strong quarter. For my first one, focusing on the New Mexico bolt-on. I was wondering if you could help frame how the D&C design and well spacing from the legacy operator compares to that of your existing assets in the Northern Delaware, and are there any specific items that you would highlight that could drive cost savings or productivity improvements?

Yes. I mean I think the legacy operator did pretty similar from a development spacing, especially in the Parkway area. What we're going to do is it's been pretty well delineated across zones for several years. And I think if you look at the results, the well productivity from the legacy operator on these assets was actually really strong. So I think they kind of – we're not explicitly familiar with their cost structure, but I think any changes is probably going to be to just apply the peer-leading Permian Resources D&C cost structure to what was a similar spacing and development program.

Got it. For my follow-up, you've certainly had success adding inventory through M&A and your ground game. My question is, how do you see the opportunity for organic inventory expansion through additions in secondary zones like the Second Bone Spring Shale or Wolfcamp D driving inventory expansion from here?

Yes. I mean I think if there's one thing that's surprised everybody to the upside of the Delaware Basin year-in, year-out is that we continue to add inventory at a pace that, frankly, has astounded me. It seems like we find a new zone that's not a secondary tertiary zone that's like a true core compute your capital zone every year. I think for us, what's a little bit different is we're accruing those zones to the back end of our inventory. We've got such a high rate of return program today that yes, we're adding sticks inventory and zones like you referenced today, but we're not making them a significant part of our program because what we have in our base case is so good. But yes, I think we're really excited about the deeper Wolfcamp stuff both in New Mexico and in Texas and some of the shales, the second Bone Shale, and the third Bone Shale in both Texas and New Mexico. I think a couple of those are still, I’d say, in the early innings of delineation, but I think we’re hopeful that organic inventory additions continue. In the Delaware Basin, we haven't touched the really deep stuff at all. I think there's been a lot of trends in the Midland Basin going deeper and deeper, and we’re probably not even in the first inning of that in the Delaware. So I think for us, PR is in a fortunate position. We’re not developing a lot of those zones today because we’ve got our consistent plan we’ve been doing the last couple of years, and that's worked really well. But I think over time, continuing to inexpensively or basically for free, adding digital inventory is a great part of the value creation story for a company like PR.

Great color. Thanks guys.

Thank you. The next question comes from Geoff Jay with Daniel Energy Partners. Please go ahead.

A quick question about sort of the acquisition's impact on your CapEx in the back half of the year. Just curious, I know it competes for capital. So I guess I'm curious if you suspect you'll add some activity on that acreage or if you'll likely just shift some things around from existing acreage to work up there.

Yes. I mean I think the kind of $20 million we outlined is kind of prebaked stuff that was in the pipeline from the legacy operator. For us, before we really get to put our mark on the assets, it's probably going to be 2026 before you see that. But yes, I do think this asset is good enough that you may see a little overweight activity to this asset and tiny modest pullback somewhere else, but it depends on how the full year 2026 shapes out.

Got it. And then I was curious, too, just given how contiguous the bolt-on is to your existing acreage. Do you foresee eventually migrating to longer laterals up there or no?

We've drilled some three milers up there, which we may at times drill. But that area is pretty shallow. I think anything longer than three miles in that area is off the table just given the TBD is such that you don't have the same amount of weight down there on the bit to go out longer than three. So it's a two- to three-mile area. There are some areas where we were 1.5 miles in – and this section here allows us to go to 2.5 or two, which is a lot of the synergies as part of the deal. But I wouldn't expect that we're going to go to anything extreme from a laddering perspective up there.

Excellent. Thank you.

Thanks, Geoff.

Thank you. Your next question comes from Paul Diamond with Citi. Please go ahead.

Thank you. Good morning and thanks for taking the call. Just a quick one. I want to talk about kind of the progression of your cost per lateral foot. You've made some good progress, 3% in the last quarter. How should we think about that going forward? Is that more linear? Should we be expecting that to flatten out? Just how do you view that?

I mean, had you asked me two months ago, I would have said it would have been flattening out, and then I'd expect kind of step changes in time with just kind of operational breakthroughs or just how we've seen the efficiency side of the equation go where you find big wins and then you kind of flatten out for a few quarters and find big wins. I'd say the one change is just the body has changed so much, and activity drops are happening so quickly; I think we will get a modest amount of service cost reductions kind of from now to the end of the year, and that obviously would help on the well cost side. So adding this together, maybe there's an expectation of a slight reduction from the $750 a foot that shows up in kind of Q3 and Q4 with hopefully an operational win somewhere over the next six to nine months. Again, I'm kind of putting my crystal ball and speculating here a little bit, but we were hoping to get to $750 per foot for the year, and I think there's more downward pressure given where the overall macro sits.

Got it. Makes sense. And just a quick follow-up. And now with this deal, you guys have added again to your non-op position. I just want to understand how you think about that longer term. Is that more designed to help the land guys and the ground game with acreage swaps? There could be some type of monetization event down the line in the future?

For us, non-op is still a small part of our portfolio. Our team has done such a good job of turning non-op into op that it’s not a meaningful part of our go-forward CapEx programs, etc. I think for us, the goal is to have more pieces that we can feed our land team to go do trades and convert non-op into op in a way that makes sense. I think Delaware Basin is a great place because there are a lot of win-wins out there like this transaction on a broader scale, but on trade on a smaller scale. The overarching goal is we want to operate because we think our cost structure and our execution product truly is differentiated. So the way to maximize value for PR is going to be overwhelming to operate. This is a great package of assets to replenish the inventory of trade bait and things that we're constantly working. Our team will be all over it post-close.

Got it. Makes sense. Appreciate the time, I'll leave it there.

Thanks, Paul.

Thank you. Your next question comes from Oliver Wang with DPH. Please go ahead.

Good morning, James, Will and Guy and team and thanks for taking the questions. Just had a couple around the acquired assets. First off, just any sort of color you can provide on what the working interest on the operated locations look like compared to the existing portfolio – and if you could maybe remind us how well costs up in that Parkway area compared to your average $750 per foot just given the shallower depth.

Yes, sure. On the working interest, it will end up being at least at close, lower the new operated locations requiring a lower working interest in our average program, kind of, call it, 50-something percent working interest. I think for us, that's part of the opportunity here. Part of the opportunity is to trade into that or to buy out the additional working interest in those operated units to kind of call it 50-something percent today. Over time, we’re confident we can get that to 75% plus like the rest of our program. On cost, it depends a little bit on what zone you're talking and where you're comparing to, but call it $100 a foot cheaper than the broader program in Parkway, which obviously makes a big difference on returns and breakeven.

Awesome. That's helpful color. And maybe for another follow-up, just looking at the acquired assets. Is there a similar optimization aspect like we saw that drove the Q1 beat on some of the recent deals you did last year on the PDP side?

I think from a straight production win, a lot of the previous operator's practices in the Parkway area are very similar to ours. So I don't expect we'll see a big uplift from switching out artificial lift. Based on the work we did in the underwriting; I don't think we have any plans to change it. The wins in this package are taking that 35% of the acres that are non-op and trading them into operated acres, whether that's operated within this package or operated elsewhere in the PR portfolio to extract maximum value from every acre we bought. That win probably shows up in ways that are less easy to quantify on a quarter-to-quarter basis, but just adds more high-quality, low breakeven top-quartile inventory for the business.

Awesome. Thanks for the time.

Thank you. There are no further questions at this time. I would now like to turn the call over to James Walter, Co-CEO for closing remarks. Please go ahead, sir.

Thanks, everyone. As you can tell by today's call, we're really excited with our team's performance during the first four months of the year. Our operational momentum built on the progress we made last year, and we are excited about the opportunities that recent volatility has presented to Permian Resources. We truly believe that it's during times like these that the strongest companies can differentiate themselves and create outsized value for shareholders that compounds over the long term. Thanks, everyone, for joining the call today and following the Permian Resources story.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.