Permian Resources (ticker not provided), an oil and gas company, has reported first-quarter earnings for 2024 that surpassed expectations, with significant production figures and strong financial performance. The company achieved a total production of 320,000 barrels of oil equivalent per day, with oil production reaching 152,000 barrels per day. Adjusted operating cash flow was reported at $844 million, while adjusted free cash flow stood at $324 million. Permian Resources has also successfully integrated Earthstone, leading to substantial cost synergies.
Key Takeaways
- Permian Resources' first-quarter production exceeded expectations with 320,000 barrels of oil equivalent per day.
- Adjusted operating cash flow reached $844 million, and adjusted free cash flow was $324 million.
- The company successfully integrated Earthstone, achieving $175 million per year in synergies and increasing their synergy target to $225 million annually.
- Two bolt-on transactions were announced, totaling $270 million, adding over 11,000 net leasehold acres and approximately 110 gross operated locations.
- Production guidance for 2024 was revised to 150,000 barrels of oil per day and 320,000 barrels of oil equivalent per day.
Company Outlook
- Permian Resources plans to focus on returns-driven production, basing future growth decisions on the commodity price environment.
- A slight production decline is expected in the second half of the year, but the company remains flexible in its approach.
- Efficiency improvements in the Midland Basin and lower future maintenance CapEx are anticipated.
- The company has no processing constraints in Northern New Mexico, and midstream partners have resolved previous issues.
- Permian Resources is open to opportunities in both the northern and southern parts of the Delaware basin, with a focus on New Mexico.
Bearish Highlights
- The company expects a slight production decline in the second half of the year.
Bullish Highlights
- Permian Resources has seen improved efficiency and reduced costs in the Midland Basin.
- The company's royalty business contributes to capital efficiency and increased free cash flow.
- Active efforts are being made to improve power infrastructure in the Permian region.
Misses
- There are no significant misses reported in the earnings call.
Q&A Highlights
- The company is focused on dividends, with a 20% increase in their base dividend and a preference for variable dividends.
- Future acquisitions aim to improve the business and provide a high rate of return to shareholders.
- An upcoming acquisition is expected to add 3,500 barrels per day of production and $50 million in capital expenditure for high-return drilling in the second half of the year.
Permian Resources has demonstrated a strong performance in the first quarter of 2024, with a strategic focus on maintaining a low-cost structure and maximizing shareholder value. The company's ability to exceed production guidance and achieve significant cost synergies through the integration of Earthstone and bolt-on acquisitions positions it well for sustained growth and efficiency. With a clear emphasis on capital discipline and shareholder returns, Permian Resources is poised to navigate the challenges and opportunities of the oil and gas industry.
InvestingPro Insights
Permian Resources has shown a robust financial and operational performance in the first quarter of 2024, which is further reflected in the real-time data and InvestingPro Tips. Here are some insights that could be valuable for investors and stakeholders interested in the company's recent activities and stock performance.
InvestingPro Data indicates that Permian Resources has a market capitalization of $13.33 billion, showcasing its significant presence in the oil and gas sector. The company's P/E ratio stands at 13.74, which may suggest that its stock is reasonably valued in comparison to its earnings. Additionally, the revenue growth for the last twelve months as of Q1 2024 is an impressive 56.13%, indicating a strong upward trajectory in the company's sales.
One of the InvestingPro Tips highlights that analysts are anticipating sales growth in the current year, aligning with the company's positive production figures and financial results. Furthermore, the stock's price movements have been identified as quite volatile, which is a key consideration for investors who are evaluating the risk and timing of their investments.
Investors looking for deeper insights can find additional InvestingPro Tips on https://www.investing.com/pro/ (replace this placeholder with the actual ticker of Permian Resources). There are more tips available that could provide a comprehensive analysis of the company's stock. For those interested in accessing these valuable insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
In summary, Permian Resources' integration of Earthstone and its strategic acquisitions, along with its strong financial indicators, suggest a positive outlook for the company. The additional InvestingPro Tips can offer further guidance for those looking to make informed investment decisions in the oil and gas sector.
Full transcript - Silver Run Acquisition Corp (PR) Q1 2024:
Operator: Good morning and welcome everyone to Permian Resources Conference Call to Discuss its First Quarter 2024 Earnings Conference Call. Today's call is being recorded. A replay of the call will be accessible until May 22, 2024 by dialing 1800-9382-488, and entering the replay access code 24995 or by visiting the company's website at www.permianres.com. At this time, I'll turn the call over to Mr. Hays Mabry, Permian Resources, Vice President of Investor Relations for some opening remarks. Please go ahead, Mr. Mabry.
Hays Mabry: Thanks, Bo, and thank you all for joining us on the company's first quarter 2024. On the call today are Will Hickey and James Walter, our Chief Executive Officers; and Guy Oliphint, our Chief Financial Officer. Yesterday, May 7, we filed a Form 8-K with an earnings release reporting first quarter results. We also posted an earnings presentation to our website that we will reference during today's call. I would like to note that many of the comments during this earnings call are forward-looking statements that involve risk 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 and the forward-looking statements sections of our filings with the SEC, including our Form 10-K, which is expected to be filed later this afternoon. Although we believe the expectations expressed are based on reasonable assumptions, they are 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 that 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.
William Hickey: Thanks, Hays. I truly believe that the first quarter was the most compelling quarter Permian Resources has delivered so far. We were able to deliver production and free cash flow above our expectations. Close out the integration of Earthstone ahead of schedule while increasing our annual synergy target by 50 million and continue to execute on accretive A&D with approximately 270 million of acquisitions announced this year. It takes an incredible team to deliver such strong execution quarter after quarter, and I look forward to sharing some more detail on Q1 today. Moving into quarterly results, I'm pleased to announce Q1 production exceeded expectations. The total production of 320,000 barrels of oil equivalent per day and oil production of 152,000 barrels of oil per day. Our strong production was attributable to multiple factors, including accelerated Earthstone D&C efficiencies and higher operational runtimes. Strong production results in CapEx of 520 million in the quarter resulted in adjusted operating cash flow of 844 million or $1.09 per share, an adjusted free cash flow of 324 million or $0.42 per share. We remain highly focused on sustaining a strong balance sheet with leverage of approximately one times an increased liquidity to over 2 billion. As part of our regularly scheduled spring bank redetermination process, we increased aggregate lender commitments under the credit facility from 2 billion to 2.5 billion while maintaining a borrowing base of 4 billion. Turning to return of capital. Our strategy remains consistent. We delivered on our previously announced increased base dividend of $0.06 per share, a 20% increase from previous quarters. For the variable portion of our return of capital, first, we repurchased a total of 2 million shares in the quarter. The remainder of our capital return will we paid out via a variable dividend of $0.14 per share, bringing the all-in quarterly return of capital to $0.24 per share. Now I'd like to spend a little time talking about the efficiencies and synergies that impacted the business in such a positive way this quarter. We rolled out the Earthstone acquisition. We are highly confident that we could reduce drilling days and completion days and improve production operations, driving material synergies to be fully realized by year end 2024. We have already achieved that and more. In just under five months, we've high graded all legacy Earthstone rigs and completion crews. This combined with PR best practices help drive an 18% product reduction in Earthstone drilling days per well and approximately 50% production -- reduction in completion days per well in the first quarter, which we were initially anticipating achieving by midyear 2024. Additionally, we are seeing some efficiency gains in the Midland Basin that were not originally forecasted, which is a testament to our team's ability to unlock value in new assets quickly. In addition, runtimes improved as a result of better compression performance, optimized artificial lift and improved chemical programs. The combination of accelerated activity and better runtimes was the primary driver of the strong production performance in Q1. The impact of the combined PR team's integration execution is that we have already achieved 175 million per year of synergies and are increasing our synergy target to an annual run rate of 225 million. As I mentioned earlier, the main drivers this increase are operational. For DC&F, we increased our per well savings from 1.2 million to 1.5 million. Similarly, we expect to be able to improve margins by approximately $1 per BOE by year end, but we've already implemented strategy in the field to realize the majority of this improvement today. Drivers of the margin improvement include reduced trucking, upgraded electrical infrastructure, rationalizing vendors, and optimizing midstream agreements. Integrations are never easy, but what our team accomplished over the last six months is a testament to a lot of hard work and dedication, and we're proud to say that Earthstone is fully integrated. With that, I'll turn it over to James to talk to A&D and an update on our ‘24 plan.
James Walter: Thanks, Will. I would like to quickly reiterate what we led off with today. That PR’s results this quarter are the best results we have had as a public company, and that applies to every department and every discipline at Permian Resources. This now marks our seventh consecutive quarter of strong operational execution as a public company and our ninth year as a leading operator of the Delaware Basin. We are highly focused on continuing to increase our track record of consistent results and low-cost operations. Our team is firing on all cylinders, positioning us very well for the remainder of the year, while successfully executing in the field and wrapping up the integration of Earthstone, our business development and land teams continue to source, evaluate, and close attractive deals in and around our enhanced footprint. Our overall objective when it comes to A&D is to target acquisitions that enhance the quality of our business and drive value for shareholders. For us, that means seeking out acquisitions that increase the quality and duration of our current inventory at prices that make sense, in our recent acquisitions achieve all of these goals. Yesterday after market closed, we announced two separate bolt-on transactions directly offset our Legacy Parkway asset in Eddy County. This asset is characterized by low D&C costs and high oil cuts that make it one of the most capital efficient assets in our portfolio. This is why we're so excited to bolster our position here with the addition of high quality, high [Indiscernible] locations that immediately compete for capital. In addition to these bolt-ons remains highly active on the grassroots side of the business, completing approximately 150 smaller transactions ahead of the [Joel bed]. These smaller deals target near term development or amongst the highest rate of return acquisitions that we find. All in these transactions add over 11,000 net leasehold acres and approximately 110 gross operated locations for a purchase price of 270 million of which we expect 245 million to be paid in the second quarter. After accounting for production value, this works out to a little less than 10,000 per net leasehold acre and approximately $1 million per gross location or 1.5 million per net location. Our presence in Midland has been one of the key drivers of our successful acquisition program, and the vast majority of the acres we are acquiring in today's announcement come from Midland based counterparties who we have longstanding relationships with. As well mentioned earlier in the call, our team's successful execution has reduced our drilling and completion times, allowing us to bring barrels forward into Q1 and increase overall production per the year. As such, we are increasing our standalone production guidance to 150,000 barrels of oil per day and 320,000 barrels of oil equivalent per day. This represents a 2% increase compared to our original guidance ranges with no change to CapEx or other guidance categories. Coming off this acceleration of production in the first quarter, we anticipate a relatively flat production profile in the second quarter with modestly lower standalone production in the second half of the year. The slight decline is driven by normal course fluctuations and working interests that occurred during a large-scale development program. The revised guidance outlined on Slides 10 and 14 reflect Permian Resources standalone projections, and do not include the impact of the acquisitions we're announcing today. We expect those acquisitions to add an average of approximately 3,500 BOE a day during the second half of the year. Given the high-quality inventory of the acquired assets, we do expect to begin development in the second half of the year, which we anticipate result in $50 million of incremental CapEx. In summary, this is a terrific start to the year, and we are proud of what we've accomplished so far in 2024. I'd like to conclude today's prepared remarks in Slide 11, which helps to reemphasize our value proposition for current and future investors. We think that the announcement today really highlights the quality of Permian Resources business and the multi-prong approach we have to driving out outside shareholder value. Since the company was formed in two, in 2022, we have delivered best in class returns for our sector amounting to over three times the annualized return of the s and p 500 during that same time period. Our performance of the last two years has been driven primarily by low cost execution and a transactions, and as a result, PR remains a compelling value within large capital oil and gas, particularly when recognizing the Permian Resources is now the second largest Permian true plan in the sector. Thank you for tuning in today. And now we'll turn it back to the operator for Q&A.
Operator: [Operator Instructions] We'll go first this morning to Neal Dingmann at Truist Securities.
Neal Dingmann: Nice job. My first question, James, maybe on your DNC plan for you or will correct me if I'm wrong, but I believe you're currently running about 11, 12 rigs, three to four spreads, or about the same as PR and Earthstone was separately. And I'm just wondering, given your notable continued efficiencies that you certainly highlighted today, I'm just wondering, and I believe the goal of relatively flat production maybe could you or will talk about potential to drop rigs or spreads or maybe just how you see the maintenance plan on a go forward.
James Walter: I think you're right. Like if you think about the plan this year, we were originally saying we drill about 250 wells and the kind of, we thought that would take about 12 rigs. With the efficiencies we're seeing today, I think it's very realistic that we could continue to execute on the same plan with less whether that's 11 rigs or kind of somewhere between 11 and 12, I think is, if we can keep these efficiencies, is very much on the table. If you think back to kind of the Colgate -- merger, it's a very similar playbook. If you think originally that was an eight-rig combined business that we were able to get down to six with the same level of efficiency. We've done this before. I do think it's worth calling out is we're not solving for kind of some maintenance plan or production per kind of the last part of your question. It's much more just an input of what's the return environment, what's the macro look like from a supply demand perspective and what does service cost look like so that we can -- what the production does is more of an output. If we continue to see strong service or strong oil prices and reduced service costs, I think it's very, very real that we could decide to kind of keep the 12 rigs or even add rigs from here to go grow production. But what you see in kind of our revised guide is more of that stick to the 250 well, and there's a real chance we could do that with less equipment.
Neal Dingmann: And then secondly, just quick on the bolt-ons, such as the recent two that you all highlight on specifically, you all seem just to have, continue to have better success adding these creative bolt-ons, versus it just seems like I don't see as many of your peers being able to do this. I'm just wondering what are the keys behind this and can you kind of continue at this pace of adding a couple, two, three, it seems like almost every quarter.
James Walter: Yes. Thank you. I think that's a pretty easy answer. I mean, I think first and foremost, it's something we're focused on that we prioritize and it's something we've done for a long time and have and continued to be really good at. And I think that's driven, it should give by a couple of things. I think first and foremost, we have the lowest cost structure in the Delaware Basin, which allows us to earn higher returns on the same assets. And as a result, kind of naturally over time assets like these do just flow to the low cost operator. I would say second, we're based in Midland, that's the heart of the Permian, the heart of the deal flow, and we've got a great reputation across the market of being good partners that people want to be across the aisle from on the transaction side. And that goes a long way. And finally for today's example, I mean, this is really cool and we're buying in an area where I think we do have a unique edge from activity and therefore the information side of things, we have more rigs running in this area than anybody else, and therefore more proprietary data to pull from better understandings, et cetera. So, I think you take all that together and it does feel like something that is definitely sustainable and edge will continue to have, well we do this every quarter, probably not, but something we expect kind of over the long term to continue to be a big part of the story.
Operator: We go next now to John Freeman at Raymond James.
John Freeman: When I'm looking at slide six and seven and just these huge efficiency gain that you all continue to get out, the legacy Earthstone properties, and I'm just trying to get a sense of what maybe that remaining gap is, if any, between kind of legacy Earthstone and PR on whatever metrics you all want to cite cost per foot or whatever. But when I look at all the different, the drilling days, the completion date, the production downtime, just some sense of how that compares to PR. Just trying to see if there's still any gap left.
James Walter: I think on the D&C side, the gap is very small, if not kind of non-existent at this point. We are -- we have different efficiencies and different assets in different areas, but we kind of view different areas whether, whether it's legacy Earthstone or legacy PR no longer matters, it's more, it's all PR. And I think on the D&C side, that gap is closed. Where I think there's still some room is on the LOE side. We've made tremendous progress in a short amount of time of improving margins through kind of what we've done on the contract side, but also just reducing LOE. But a lot of the other LOE stuff, think like SWD disposal agreements or recycling agreements have some time to them and require more work and more time to get fully incorporated. So as I think about kind of where the last kind of gap remains between legacy Earthstone and PR would be more LOE focused, if that makes sense.
John Freeman: That's perfect. Thanks. And then just the follow up for me. Gas takeaway's been pretty topical, with what's going on at Waha. Just any sort of updated thoughts from you all and how you all are thinking about gas takeaway and how to address that longer term?
James Walter: Yes, I mean I think, I mean, I think it's pretty obvious to either run the call pricing at Waha has been challenged this year and probably will be until we get closer to new pipes coming online in the fourth quarter. And I think that is what it is. We're fortunate that dry gas only makes up about 5% of our revenue in any given year, so the business really isn't affected. But I think kind of worth pointing out a couple other things, only about half of our gas is exposed to Waha pricing this year. Kind of other half is either covered by attractive basis hedges or sales at better regional hubs today. But yes, something we're always trying to kind of focus on and work on. We sell about a quarter of our gas at hubs other than -- today, and are constantly looking to find ways we can get that percentage higher. We actually have a contract probably get signed in the next week or two that should allow us to get more volume sold at Houston pricing kind of next year. So kind of more to come on that front. I'd say that's something we've been working on for a long time and continue to chip away at. But I think the most important thing is, we've got awesome partners on the midstream side. We've got firm capacity and our molecules are going to flow even if we saw regional constraints later this year.
Operator: We go next now to Scott Hanold at RBC.
Scott Hanold: I was wondering if we can go back to sort of the outlook through the balance of the year, and just holistically how you guys like to think about the business? Obviously, your cycle times are improving, so you pulled for a little bit more of your activity and production in 1Q. And so like, you kind of said it does taper and you have a soft decline in the back half of this year. But how do you think about like the setup then for ‘25 with that? Would you guys, or into ‘25 and over the long term, like to see more kind of flattish growth, do you want to see some more moderate growth? And if you could talk about like any kind of cadence variability through the year is would you like to see keep things constant or do you think there will be some cadence depending on the cycle times?
William Hickey: I mean first and foremost kind of as we think about the trajectory from a production perspective of the company, I've said it many times, I'll say it again, like it really is returns driven input and production is just an output. Obviously, kind of in over the last -- two weeks ago, I'd say the returns environment was extremely good, and we've made some headway on the service cost side kind of over the balance of the year. So it was looking good. I think that today it's still good but not quite as good as it was a few weeks ago. And I don't yet know what the world will look like six months from today as we go into ‘25. I would say that kind of the really, if you think about what happened over the course of this year so far is it's just been the whole set schedule has shifted forward. We've drilling wells faster, we're completing wells faster and as such kind of just given the natural working interest changed over large scale development, the back half of the year are really kind of dip is just really a little bit less working interest under a few wells that moved in from the next year. And that naturally corrects itself. Said differently if we maintain the same pace, kind of call it 250 to 260 wells per year, like that actually does set up for a really good ‘25. It's kind of a slight decline back half of the year and then bounces back in ‘25. I'm not saying that is our plan. We we're going to spend a lot of time over the next six months figuring out exactly what to want to do to ‘25, and I think it could be anywhere from 11 to 13 rigs based on commodity prices. And we'll kind of see what it makes sense there. But as I think of -- I wouldn't think of this kind of slow tapering back half of the year as an indication of kind of future trajectory of the production profile in outer years.
Guy Oliphint: This plan's great, it sets us up like we always try to do, it's really good optionality because we don't know what the world's going to look like in ‘25 and it kind of puts us somewhere in the middle of that 0% to 10% growth of the long term that we've talked about and we can make a decision as we get closer to that year.
Scott Hanold: In your prepared comments, you also mentioned that you're seeing some better performance or efficiencies in the Midland and that sounds like you weren't necessarily expecting. Could you a little color and context behind exactly what that is and where the benefits were? Was it more well productivity or is it cycle times or just cost reductions on OpEx.
James Walter: It's really just D&C CapEx, we were -- we have not drilled a lot of wells in the Midland basins, so didn't expect to be able to cut kind of near the amount of cost on the Midland Basin size we have on the Delaware. And we've been surprised to the upside in that regard. I still think we have a ways to go to catch up with where kind of the leading operators in the Midland Basin are on from a CapEx perspective, but we've made big strides that kind of surprised us to the upside.
Scott Hanold: And was that more on just the cycle times drilling and completion time of those walls?
James Walter: I would say it's just cycle times casing design, kind of everything that would lead to a lower CapEx per foot on a Midland basin.
Operator: We're next now to Gabe Daoud at TD Cowen.
Gabe Daoud: Understand it's certainly a little bit too early to be thinking about ‘25, but I guess just piggybacking of Scott's question here, if we just think about all the synergy capture and efficiency gains and maybe this year being a little bit heavier on midstream spend or infrastructure spend, I should say, is it fair to assume maybe ‘25, assuming similar activity levels CapEx is probably a bit lower than where we are today?
James Walter: Yes, I think kind of certainly maintenance CapEx would be lower than what we've outlined this year, just kind of given where the business sits, the efficiency we achieve, et cetera. I think, that's definitely a fair assumption.
Gabe Daoud: Great. And then maybe as a follow up noted or talked about egress a bit just curious in that Northern New Mexico area in both Eddie and Lee, are you seeing any processing capacity tightness or any other ministry managers that are worth mentioning or recognize there's no rigs over in Eddie County just yet? Is that driven by constraints at all or are you guys just planning on getting after that in the second half of this year?
James Walter: Yes, I mean, I think the kind of lack of rigs in any area today is just driven by our focus on doing some of these larger developments and making sure when we put rigs on it, we're doing it as quickly, as efficiently as possible and touching kind of all parts of the cube that need to be co-developed. So, but I think macro wise, gas processing constraints, it actually feels really good this year. I think last year we'd mentioned before probably Q2, Q3 timeline there were more challenges on the processing, but even more kind of infield compression and kind of plumbing issues in the middle of last year. But those have all really resolved themselves. I'd say our midstream partners have done a ton of work and spent a ton of money and our gas processing in the New Mexico, Delaware feels like it's a great spot today and frankly thankful not to have any constraints of that nature or really anything else kind of able to do what we want up there.
Operator: We'll go next now to Derrick Whitfield at Stifel.
Derrick Whitfield: Congrats on a strong update. With my first question I wanted to lean in on your D&C efficiencies to better understand the rate of improvement you're seeing. If we were to compare PR to PR on slide six, how do those cycle times in the Northern Delaware compare with your Q4 averages.
James Walter: PR from Q4 to Q1, we've got into better, but it's going to be kind of single digit percent improvement as compared to the big improvement you see if you compare legacy or send to PR.
Derrick Whitfield: Great. And then maybe shifting over to slide nine, the identified location count of 110 gross locations appears conservative to us on the surface. Can you offer any color on the degree of legacy operator development and your general underwriting assumptions for this part of the basin?
William Hickey: I'd say, it's a good question and very astute. I think answer your second question first. It's pretty undeveloped in acreage position, if there's a handful of wells on it. But it's as undeveloped as any asset we've looked at in a long time, which is great 'cause it allows us to come in, take advantage of clean fairways and kind of do what PR does. Best regards to inventory. I think it probably is conservative, I think we're trying to book locations that we have a very high degree of competence in here and is it more likely to have more zones kind of come into the money here? I think the answer's probably yes, but we feel good about what we've put out is that being a real base case and something that we can stand behind.
Operator: We'll go next now to Leo Mariani at Roth MKM.
Leo Mariani: I wanted to dig in a little bit to your comments around kind of flattish second quarter production and then kind of slightly lower in the second half. If I heard your comments right, it sounded like a lot of this was just based on working interest changes. I was hoping maybe you could kind of quantify some of that. I mean, I think you guys are talking about 75% average work in interest, but maybe it's a little higher in the first half and lower in the second. Just any help on that would be great.
Guy Oliphint: I think it's just kind of normal fluctuations when we're running a multi rig program like this, especially as you're kind of stacking rigs to pursue the full field development strategy that we've been pursuing for a long time. Like one quarter, maybe 70%, one may be 80% to get back to an average of 75% and just kind of how it is. I think you see this especially kind of overtime as you have more concentration of rig counts on particular developments, but it's all normal and, and kind of evens out over time.
Leo Mariani: But it definitely sounds like working interest is a little higher in the first and a little lower in the second half. And then how would that translate into CapEx? Would that basically give you a CapEx a little lower in the second half, standalone versus first half?
Guy Oliphint: That's a good assumption.
Operator: We'll go next now to Oliver Huang at TPH.
Oliver Huang: Wanted to start on the A&D side. I can't help but notice you all have been fairly active in this area of Edie County. Kind of looking back at where the Q1 Bolton from the latest two transactions announced last night to sit. Just kind of wondering if you all might be able to speak to, if there's anything specific that you're seeing in the area that's driving an increased focus from an a perspective for you all.
William Hickey: That's a great question and I think kind of post-closing of Earthstone to today, we just saw a real market window where we were able to go buy four extremely attractive bolt-ons and quite a few grassroots deals at prices that were really attractive to us. And I think the reason we were able to do so, which I touched on a little bit with Neal's question at the beginning was because we've been the most active operator in this part of Eddy County for a long time, and therefore had a lot of really exciting proprietary results both on kind of zones, well performance, and I think most importantly the cost side or we're doing this cheaper up here than I think anybody would expect. Kind of just the unique, it's kind of one of those windows that we saw an opportunity and we hit it hard and I think these are some of the best deals we've done. It wasn't -- I didn't think we'd get all of these deals the way we did, but it's a great outcome and it adds some really core inventory and what's our most capital efficient asset.
Oliver Huang: And for my follow up, just kind of wondering if you all could provide an update on your royalty position. It seems like an aspect of the business where you all have been able to pick up some decent interest of the past nine months or so, that's kind of going under the radar. So any color there would be helpful.
James Walter: Yes, I mean, I think we're always trying to buy acreage and inventory that competes for capital. And a big part of that is what is the royalty burden. So we target assets that have advantage in our eyes, lower royalties that really just help our capital efficiency. I think today we've got a royalty business that we're really proud of, kind of 75,000 net royalty acres is not insubstantial. I don't think there's anything strategic that we have planned with that today, but I do think that's a big part of our capital efficiency story. We're getting more fee free cash flow for every dollar of CapEx that we spend as a result. So I think, ultimately it's something that just makes our widget better and helps our value creation increase over time. So it's something that we're proud of, we're focused on, I think probably a little underappreciated by the market and, but it's really ultimately comes down to helping us earn better returns on every dollar that we spend.
Operator: [Operator Instructions] We go next now to Geoff Jay at Daniel Energy Partners.
Geoff Jay: I was just looking for you referenced your power infrastructure build outs would kind of love to hear what's happening there, what the scale of that is, how big that's going to be for you guys. It's obviously kind of a pressing issue these days.
James Walter: Yes, look, line power in in the kind of entire Permian's tough in Texas it's tough and in New Mexico's tough. So, we're trying our best to stay in front of it. I'd say kind of as you think about our power needs, if we can be on line power, that's obviously preference. And after that, if we can kind of leverage natural gas power generators is probably the second-best answer. And that's kind of what you'll see for the majority of our New Mexico infrastructure. But it's a priority for us. I'd say, we are actively looking at ways to improve that position collaborating with others to look at building incremental substations and really anything we can do. But it doesn't come quick and I think it'll be a challenge for the industry for the next few years. I don't think it means we won't be able to produce our wells. It's just a little bit less efficient to be on natural gas power generators than it would be to be all online power.
Operator: We'll go next now to Paul Diamond with Citi.
Paul Diamond: Just a quick one, talking about the kind of acquisition pipeline as you're seeing looking forward to kind of what's next. Are you seeing any kind of movement on the bid asks, based on scale, location, or is it all pretty much pretty cohesive and correlated?
James Walter: Look, I mean I think our pipeline on the A&D side feels really good. I think there's a lot of -- there tend to be lots of opportunities in the Delaware and I think our position as a kind of preferential party for a lot of sellers and a low cost operate in the basin position as well as assets come for sale, kind of both marketed deals which we participated in successfully, but also, I think just importantly kind of off market assets, which has been a large chunk of our acquisition program historically. But it feels good. I don't think, there's probably not the size of deals that you saw hitting the market in ‘22 and ‘23 in the Delaware, which I think we largely stayed on the sidelines from. But I think we're seeing a lot of stuff that fits kind of the grassroots side is maintaining lot momentum and we're still seeing lots of bolt-ons probably coming down the pipe this year where we wind up acquiring all of them definitely not, but are there some that could fit? I'd like to think so, but we're really picky and we want to buy assets, like I said, that make our business better and that earn a high rate of return and drive value for shareholders. If we can continue to do that, that's great, but we've said it before, we don't need to do anything. We think we've got an incredible inventory base and incredible standalone business. If we can find those opportunities, we'll be excited to pursue them, but certainly don't feel any pressure to do so.
Paul Diamond: And just a quick follow-up, so thus far, you guys have been pretty balanced with your shareholder return framework. Is there anything you guys are seeing in the markets that would kind of tip that scale one way or the other?
William Hickey: No, we're going to kind of naturally bias towards the dividend. I think that the variable dividends are our base case and we'll be opportunistic on potentially increasing share buybacks at some point in the future if kind of dislocations and large opportunities exist. But no, I'd say really steady as she goes on the capital return strategy. Do think it's worth mentioning? We did show a 20% increase in our base dividend this year, which should hit for the quarterly dividend payment upcoming and a nice increase in our variable cash dividend as well. It feels like that's working really well and we're excited about it.
Operator: We'll go next now to Kevin MacCurdy at Pickering Energy Partners.
Kevin MacCurdy: To follow-up on an earlier question about M&A, your last couple of deals have been concentrated in the Northern Delaware. Just kind of a general question on how you are viewing opportunities in the southern Delaware versus the northern Delaware. Are there, as many opportunities out there and how do you kind of compare the two of them?
William Hickey: I think that's a great question. I think looking back historically, the kind of first consolidation wave in the Delaware was Texas focused. If you think like 2017, 2018, 2019 a lot of Texas businesses and that's where the Delaware got started at least activity was faster to begin. So I think you've seen a natural consolidation wave in the Delaware as of late. I think for us specifically we got a great Texas position today with some really high return to go forward drilling to do. If we could find opportunities in Texas that compete for capital, like what we've seen in New Mexico, we'd be really excited about it. I think those opportunities do still exist. I just think kind of the majority of assets that we've seen that fit what we're trying to do from a making the business better standpoint have been in New Mexico the last couple of years. But I think that could change and we'd be really excited if we could find similar opportunities on the Texas side.
Kevin MacCurdy: And changing gears a little bit, you mentioned an additional 3,500 barrels a day equivalent and an additional $50 million of capital once you close the bolt on acquisitions later this quarter. Just to clarify, is the 350, or -- sorry, the 3,500 barrels a day flowing, is that flowing production now? And if so, what will be the production impact of the additional $50 million capital spent?
William Hickey: That production is online now. The majority of that's from an acquisition we haven't closed and don't close to the end of this quarter. It's kind of online now, but it's not ours, if you will. And then $50 million is CapEx that we're going to spend in the back half of this year. That awesome, awesome high return inventory. Really excited to get our hands on. Again, we don't own it today so we can't get --again. All the production you'd see from that's going to show up next year, but really strong returns and something we're excited to get after as soon as we can get our hands on the asset.
Operator: Ladies and gentlemen, it appears we have no further questions this morning. Mr. Walter, I'd like to turn things back to you, sir, for any closing comments.
James Walter: I haven't gotten up to a great start in 2024. Our primary goal remains the same as it was when we announced at Colgate Centennial merger in May of 2022. To maximize shareholder value over the long term. And 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. Thanks to everyone for joining the call today and for following the Permian Resources story.
Operator: Thank you, gentlemen. Again, ladies and gentlemen, that will conclude today's Permian Resources first quarter earnings conference call. Again, thanks so much for joining us today, and we wish you all a great day. Good bye.
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