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☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2023

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                     to                   

Commission file number 001-37697

(Exact Name of Registrant as Specified in its Charter)

Delaware						47-5381253
(State of Incorporation)						(I.R.S. Employer Identification No.)

(Registrant’s telephone number, including area code): (432) 695-4222

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

PR

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

☒

☐

☐

☐

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 1, 2023, there were 773,766,823 shares of total common stock outstanding, including 509,026,708 shares of Class A Common Stock, par value $0.0001 per share, and 264,740,115 shares of Class C Common Stock, par value $0.0001 per share.

The following are abbreviations and definitions of certain terms used in this Quarterly Report on Form 10-Q, which are commonly used in the oil and natural gas industry:

Bbl. One stock tank barrel of 42 U.S. gallons liquid volume used herein in reference to crude oil, condensate or NGLs.

Bbl/d. One Bbl per day.

Boe. One barrel of oil equivalent, calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one Bbl of oil. This is an energy content correlation and does not reflect a value or price relationship between the commodities.

Boe/d. One Boe per day.

Btu. One British thermal unit, which is the quantity of heat required to raise the temperature of a one-pound mass of water by one-degree Fahrenheit.

Completion. The process of preparing an oil and gas wellbore for production through the installation of permanent production equipment, as well as perforation and fracture stimulation to initiate production.

Development well. A well drilled within the proved area of an oil or natural gas reservoir to the depth of a stratigraphic horizon known to be productive.

Differential. An adjustment to the price of oil or natural gas from an established spot market price to reflect differences in the quality, gathering, processing and transportation fees and location of oil or natural gas.

Exploratory well. A well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or natural gas in another reservoir.

Extension well. A well drilled to extend the limits of a known reservoir.

Field. An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.

Formation. A layer of rock which has distinct characteristics that differs from nearby rock.

Henry Hub. The Henry Hub pipeline is pricing point for natural gas contracts traded on NYMEX used as a benchmark in natural gas pricing.

Horizontal drilling. A drilling technique used in certain formations where a well is drilled vertically to a certain depth and then drilled at a right angle within a specified interval.

ICE Brent. Brent crude oil traded on the Intercontinental Exchange, Inc. (ICE).

MBbl. One thousand barrels of crude oil, condensate or NGLs.

MBoe. One thousand Boe.

Mcf. One thousand cubic feet of natural gas.

Mcf/d. One Mcf per day.

MMBtu. One million British thermal units.

MMcf. One million cubic feet of natural gas.

NGL. Natural gas liquids. These are naturally occurring substances found in natural gas, including ethane, butane, isobutane, propane and natural gasoline, that can be collectively removed from produced natural gas, separated in these substances and sold.

NYMEX. The New York Mercantile Exchange.

NYSE. The New York Stock Exchange.

Operator. The individual or company responsible for the development and/or production of an oil or natural gas well or lease.

Proved developed reserves. Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared with the cost of a new well.

Proved reserves. The estimated quantities of oil, NGLs and natural gas that geological and engineering data demonstrate with reasonable certainty to be commercially recoverable in future years from known reservoirs under existing economic and operating conditions.

Proved undeveloped reserves or PUD. Proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for completion. 

Realized price. The cash market price less differentials.

Reserves. Estimated remaining quantities of oil and natural gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and natural gas or related substances to market and all permits and financing required to implement the project.

Reservoir. A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.

Royalty interest. An interest in an oil or gas property entitling the owner to shares of the production free of costs of exploration, development and production operations.

SOFR. Secured Overnight Funding Rate.

Spot market price. The cash market price without reduction for expected quality, location, transportation and demand adjustments.

Unproved reserves. Reserves attributable to unproved properties with no proved reserves.

Wellbore. The hole drilled by a drill bit that is equipped for oil and natural gas production once the well has been completed. Also called well or borehole.

Working interest. The interest in an oil and gas property (typically a leasehold interest) that gives the owner the right to drill, produce and conduct operations on the property and to a share of production, subject to all royalties and other burdens and to all costs of exploration, development and operations and all risks in connection therewith.

Workover. Operations on a producing well to restore or increase production.

WTI. West Texas Intermediate is a grade of crude oil used as a benchmark in oil pricing.

This Quarterly Report on Form 10-Q (“Quarterly Report”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words “could,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “goal,” “plan,” “target” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under Item 1A. Risk Factors in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”) and the risk factors and other cautionary statements contained in our other filings with the United States Securities and Exchange Commission (“SEC”).

Forward-looking statements may include statements about:

•volatility of oil, natural gas and NGL prices or a prolonged period of low oil, natural gas or NGL prices and the effects of actions by, or disputes among or between, members of the Organization of Petroleum Exporting Countries (“OPEC”), such as Saudi Arabia, and other oil and natural gas producing countries, such as Russia, with respect to production levels or other matters related to the price of oil;

•political and economic conditions in or affecting other producing regions or countries, including the Middle East, Russia, Eastern Europe, Africa and South America;

•our business strategy and future drilling plans; 

•our reserves and our ability to replace the reserves we produce through drilling and property acquisitions; 

•our ability to realize the anticipated benefits and synergies from the Earthstone Merger and effectively integrate the assets (as such capitalized terms are defined below);

•our drilling prospects, inventories, projects and programs; 

•our financial strategy, return of capital program, leverage, liquidity and capital required for our development program; 

•our realized oil, natural gas and NGL prices; 

•the timing and amount of our future production of oil, natural gas and NGLs; 

•our ability to identify, complete and effectively integrate acquisitions of properties or businesses;

•our hedging strategy and results; 

•our competition and government regulations; 

•our ability to obtain permits and governmental approvals; 

•our pending legal or environmental matters; 

•the marketing and transportation of our oil, natural gas and NGLs; 

•our leasehold or business acquisitions; 

•cost of developing or operating our properties;

•our anticipated rate of return;

•general economic conditions; 

•weather conditions in the areas where we operate;

•credit markets; 

•our ability to make dividends, distributions and share repurchases;

•uncertainty regarding our future operating results; and 

•our plans, objectives, expectations and intentions contained in this Quarterly Report that are not historical.

We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the development, production, gathering and sale of oil and natural gas. These risks include, but are not limited to commodity price volatility, inflation, lack of availability of drilling and production equipment and services, risks relating to the merger of the company with Earthstone Energy, Inc. (the “Earthstone Merger”), environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures and the other risks described in “Item 1A. Risk Factors” in this Quarterly Report and our 2022 Annual Report.

Reserve engineering is a process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil and natural gas that are ultimately recovered.

Should one or more of the risks or uncertainties described in this Quarterly Report or our 2022 Annual Report occur, or underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statement in this section, to reflect events or circumstances after the date of this Quarterly Report.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (continued)
(in thousands)

Reconciliation of cash, cash equivalents and restricted cash presented on the consolidated statements of cash flows for the periods presented:

(1)    Included in Prepaid and other current assets as of September 30, 2023 and September 30, 2022 in the consolidated balance sheets.

Permian Resources Corporation is an independent oil and natural gas company focused on the responsible acquisition, optimization and development of crude oil and associated liquids-rich natural gas reserves. The Company’s assets and operations are concentrated in the Delaware Basin, a sub-basin of the Permian Basin, and its properties consist of large, contiguous acreage blocks located in West Texas and New Mexico. Unless otherwise specified or the context otherwise requires, all references in these notes to “Permian Resources” or the “Company” are to Permian Resources Corporation and its consolidated subsidiaries including, Permian Resources Operating, LLC (“OpCo”).

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, certain disclosures normally included in an Annual Report on Form 10-K have been omitted. The consolidated financial statements and related notes included in this Quarterly Report should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the period ended December 31, 2022 (the “2022 Annual Report”). Except as disclosed herein, there have been no material changes to the information disclosed in the notes to the consolidated financial statements included in the Company’s 2022 Annual Report.

In the opinion of management, all normal, recurring adjustments and accruals considered necessary to present fairly, in all material respects, the Company’s interim financial results have been included. Operating results for the periods presented are not necessarily indicative of expected results for the full year. The consolidated financial statements include the accounts of the Company and its subsidiary OpCo, and OpCo’s wholly-owned subsidiaries. Noncontrolling interest represents third-party ownership in OpCo and is presented as a component of equity. Refer to Note 9—Shareholders’ Equity and Noncontrolling Interest for a discussion of noncontrolling interest.

The preparation of the Company’s consolidated financial statements requires the Company’s management to make various assumptions, judgments and estimates to determine the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of commitments and contingencies. Changes in these assumptions, judgments and estimates will occur as a result of the passage of time and the occurrence of future events, and accordingly, actual results could differ from amounts previously established. Additionally, the prices received for oil, natural gas and NGL production can heavily influence the Company’s assumptions, judgments and estimates, and continued volatility of oil and gas prices could have a significant impact on the Company’s estimates.

The more significant areas requiring the use of assumptions, judgments and estimates include: (i) oil and natural gas reserves; (ii) cash flow estimates used in impairment tests for long-lived assets; (iii) impairment expense of unproved properties; (iv) depreciation, depletion and amortization; (v) asset retirement obligations; (vi) determining fair value and allocating purchase price in connection with business combinations and asset acquisitions; (vii) accrued revenues and related receivables; (viii) accrued liabilities; (ix) derivative valuations; (x) deferred income taxes; and (xi) determining the fair values of certain stock-based compensation awards.

The Company has operating leases for drilling rig contracts, office rental agreements and other wellhead equipment. During the nine months ended September 30, 2023, the Company entered into additional wellhead equipment lease agreements for assets placed into service and recorded lease right-of-use assets and related liabilities based on the present value of future lease payments over the equipment lease terms. As of September 30, 2023, the Company had recorded in aggregate a $15.4 million current operating lease liability and a $14.1 million noncurrent operating lease liability related to these wellhead equipment agreements.

In April 2023, the Company purchased an office building in Midland, Texas for $27.5 million, where it had previously been a lessee of the building at the time of purchase. As a result of this purchase, $9.3 million of operating lease right-of-use assets and $13.6 million of operating lease liabilities were removed from the consolidated balance sheet as of September 30, 2023. As part of the building purchase, the Company also assumed a ninety-nine year ground lease and accordingly, recorded a financing lease liability of $15.5 million as of September 30, 2023, which represents the present value of the future payment obligations under its lease term. The lease payments start at $0.8 million per year and escalate 2.5% annually until year 2076. The corresponding right-of-use asset recognized for this ground lease amounted to $15.2 million as of September 30, 2023.

The following table provides additional information related to the Company’s lease assets and liabilities as presented on balance sheet for the periods presented:

(in thousands)			Balance Sheet Classification						September 30, 2023						December 31, 2022
Assets
Operating right-of-use assets			Operating lease right-of-use asset						$	58,446					$	64,792
Finance right-of-use asset			Other noncurrent assets						15,228						—
Liabilities
Current
Operating lease liabilities			Operating lease liabilities						$	34,266					$	29,759
Finance lease liability			Other current liabilities						748						—
Noncurrent
Operating lease liabilities			Operating lease liabilities						$	26,156					$	41,341
Finance lease liability			Other noncurrent liabilities						14,735						—

There have been no other significant changes in leases during the nine months ended September 30, 2023. Refer to Note 16—Leases in the notes to the consolidated financial statements in Part II, Item 8 of the Company’s 2022 Annual Report.

The Company is subject to U.S. federal, state and local income taxes with respect to its allocable share of any taxable income or loss of OpCo, as well as any stand-alone income or loss generated by the Company. As of the date of the Colgate Merger (defined below), OpCo is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, OpCo is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by OpCo is passed through to and included in the taxable income or loss of its members, including the Company, on a pro rata basis corresponding to the percentage of Common Units in OpCo owned. Prior to the Colgate Merger, OpCo was fully owned by the Company and all income and loss was taxable.

Income tax expense recognized during interim periods is based on applying an estimated annual effective income tax rate to the Company’s year-to-date income, plus any significant unusual or infrequently occurring items which are recorded in the interim period. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in various state jurisdictions, permanent and temporary differences and the likelihood of recovering deferred tax assets generated. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information becomes known or as the tax environment changes.

On August 21, 2023, the Company entered into an Agreement and Plan of Merger (“the Merger Agreement”) with Earthstone Energy, Inc. (“Earthstone”) pursuant to which Permian Resources acquired Earthstone (the “Earthstone Merger”). Earthstone was an independent oil and gas company engaged in the operation and development of oil and natural gas properties in the Permian Basin in both Texas and New Mexico. Earthstone’s assets consisted of approximately 167,000 net leasehold acres in the Midland Basin and 56,000 net leasehold acres in the Delaware Basin, and Earthstone’s Delaware Basin acreage is offset to Permian Resources’ existing acreage in Lea and Eddy Counties. The Merger was completed to drive long-term accretion across the Company’s key financial and operating metrics, enhance shareholder returns, improve capital efficiency, and add significant core inventory locations to the Company’s existing position in the Permian Basin.

In connection with the Merger, the Board of Directors of both companies unanimously determined (i) each share of Earthstone Class A Common Stock would be converted into the right to receive 1.446 shares (the “Exchange Ratio”) of Permian Resources Class A Common Stock, (ii) each share of Earthstone Class B Common Stock would be converted into the right to receive 1.446 shares of Permian Resources Class C Common Stock, (iii) each common unit of Earthstone Energy Holdings, LLC, a subsidiary of Earthstone (“Earthstone OpCo”) representing limited liability company membership interests in Earthstone OpCo would be converted into the right to receive a number of common units representing limited liability company interests in OpCo (“Common Units”), equal to the Exchange Ratio, and (iv) all existing shares of Permian Resources Common Stock would remain outstanding. The companies have filed their definitive proxy statements with the SEC, and the shareholder meetings were held October 30, 2023, where the Company’s and Earthstone’s shareholders approved the Earthstone Merger.

On November 1, 2023 the Earthstone Merger was completed and the Company issued 161.0 million shares of its Class A Common Stock and 49.5 million shares of its Class C Common Stock to Earthstone stockholders under the terms of the Merger Agreement, and the Company also assumed Earthstone’s debt upon closing of Merger, which consisted of $1.05 billion of senior notes and all borrowings outstanding under its credit facility at closing. Based on the closing price of the Company's Class A Common Stock on November 1, 2023, the preliminary value of the share consideration was approximately $3.0 billion.

The Earthstone Merger will be accounted for as a business combination using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, with the Company being identified as the acquirer for accounting purposes. Under the acquisition method of accounting, the assets and liabilities of Earthstone will be recorded at their respective fair values as of the November 1, 2023 acquisition date. The preliminary purchase price allocation and accounting is not complete as of the date of this report due to the timing of the close of the Earthstone Merger.

Although this Quarterly Report on Form 10-Q was filed after the completion of the Earthstone Merger, information set forth herein only relates to the results of operations for Permian Resources for the quarter and year-to-date periods ended September 30, 2023 and 2022 and does not include any financial information for Earthstone for such periods. The post-acquisition results of operations of Earthstone for the last two months of the fourth quarter of 2023 will be included in the Company's consolidated results for the period ending December 31, 2023.

On February 16, 2023, the Company completed the acquisition of approximately 4,000 net leasehold acres and 3,300 net royalty acres for an unadjusted purchase price of $98 million. The acquired assets consist largely of undeveloped acreage that is contiguous to one of the Company’s existing core acreage blocks in Lea County, New Mexico.

The acquisition was recorded as an asset acquisition in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. Total consideration paid was $107.3 million after settlement statement adjustments, of which $61.8 million was allocated to unproved properties and $60.5 million to proved properties on a relative fair value basis, $9.8 million to net working capital (including $11.3 million in cash acquired), less a deferred tax liability assumed of $24.8 million. As of September 30, 2023, the Company incurred $1.6 million in direct transaction costs related to this purchase that have been capitalized as acquisition costs.

On March 13, 2023, the Company completed the sale of its operated saltwater disposal wells and the associated produced water infrastructure in Reeves County, Texas. The total cash consideration received at closing was $125 million of which $65 million was directly related to the sale and transfer of control of its water assets, while the remaining $60 million consisted of contingent consideration that is tied to the Company’s future drilling, completion and water connection activity in Reeves County, Texas. The $60 million of contingent consideration will require repayment if certain performance obligations through September 2026 are not met, and it has been recorded as a liability within the Company’s consolidated balance sheet accordingly. There was no gain or loss recognized as a result of this divestiture.

On September 1, 2022, the Company completed its merger (the “Colgate Merger”) with Colgate Energy Partners III, LLC (“Colgate”). Colgate was an independent oil and gas exploration and development company with properties located in the Delaware Basin. Refer to Note 2—Business Combination footnote in the notes to the consolidated financial statements in Part II, Item 8 of the Company’s 2022 Annual Report for additional details regarding the Colgate Merger.

The Colgate Merger was accounted for as a business combination using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, with the Company being identified as the accounting acquirer. Under the acquisition method of accounting, the assets acquired and liabilities assumed are recorded at their respective fair values as of the Colgate Merger closing date, which requires judgment and certain assumptions to be made. Oil and natural gas properties were valued using an income based approach which incorporates a discounted cash flow method. The fair value of Colgate’s outstanding senior notes was based on unadjusted quoted prices for these same notes in an active market. The value of derivative instruments was based on Level 2 inputs similar to the Company's other commodity price derivatives. Refer to Note 8—Fair Value Measurements for additional information on fair value measurements.

The purchase price allocation was finalized during the third quarter of 2023. The following table represents the final merger consideration and purchase price allocation of the identifiable assets acquired and the liabilities assumed based on their respective fair values as of the closing date of the Colgate Merger.

(1)     The fair value ascribed to the Company’s Class C Common Stock, that was issued as part of merger consideration, was determined by applying a valuation discount to the share price of the Company’s Class A Common Stock as of the Merger closing date. This discount was determined using a Finnerty model, which considers the lack of marketability of the Class C Common Stock associated with its 180-day minimum holding period required per the terms of the transaction agreement governing the Colgate Merger. The valuation model considers expected volatility based on the historical volatility of the Company’s Class A Common Stock, a risk-free interest rate based on U.S. Treasury yield curves, and the Company’s current dividend yield.

The results of Colgate’s operations have been included in the Company’s consolidated financial statements since September 1, 2022, the effective date of the Colgate Merger. The following supplemental unaudited pro forma financial information (“pro forma information”) for the three and nine months ended September 30, 2022 has been prepared from the respective historical consolidated financial statements of the Company and Colgate and has been adjusted to reflect the Colgate Merger as if it had occurred on January 1, 2022.

The pro forma information is not necessarily indicative of the results that might have occurred had the Colgate Merger occurred in the past and is not intended to be a projection of future results. Future results may vary significantly from the results reflected in the following pro forma information.

			Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
Total Revenue			$	859,264					$	2,472,119
Net Income (loss)			207,717						325,523
Earnings (loss) per share:
Basic			$	0.73					$	1.14
Diluted			0.65						1.03

Accounts receivable are comprised of the following: