Permian Resources to lean on New Mexico to reach 6% oil growth target

Feb. 28, 2024
The acquisition and integration of Earthstone is paying dividends faster than expected.

Permian Resources Corp., Midland, will focus more heavily on its New Mexico operations in 2024 as it builds on last fall’s $4.5 billion acquisition of Earthstone Energy Inc. (OGJ Online, Aug. 21, 2023).

The leaders of Permian said Feb. 28 they will dedicate 70% of the company’s roughly $2 billion in planned capital spending to the Northern Delaware basin while the Southern Delaware basin in Texas will get about a quarter of those resources. The small remainder will be allocated to the Midland basin. In all, the Permian team plans to turn in line about 250 wells in 2024 (with an average length of 9,300 ft) versus about 150 in 2023 from Permian Resources only.

Permian Resources' purchase of Earthstone closed Nov. 1 and co-chief executive officer Will Hickey and his team said last year they intended to slightly favor New Mexico once the organizations joined forces. That emphasis will be heavier now that integration work has progressed faster than planned, Hickey said on a conference call with analysts.

Permian Resources’ teams, he said, have been able to build on and accelerate efficiency efforts at Earthstone to lower that organization’s 2-mile well costs about 12% since November and limit downtime. The goal is to finish 2024 with drilling and completion costs 10% below those of late 2023.

Permian Resources grew crude oil and total average production to about 137,000 b/d and 285,000 boe/d during the fourth quarter. The company is looking to grow those numbers to 145,000 b/d and 315,000 boe/d, respectively, this year. 

Permian Resources—which emerged mid-2022 via the merger of Centennial Resource Development Inc. and Colgate Energy Partners III LLC—set a 2024 capex budget that includes additional allocation for water-related facilities and broader infrastructure work related to the Earthstone integration (OGJ Online, Sept. 1, 2022). Hickey said non-drilling and completions (D&C) spending’s share of total capex, which will be about 25% this year, should retreat to around 15% starting in 2025.

The team continues to pursue and complete smaller land deals in the Delaware basin. Since the beginning of November, the operator has added about 14,000 net acres to its portfolio and completed 145 “ground game” acquisitions in 2023.

“That drives value in a different way than I think a lot of our peers are,” co-chief executive officer James Walter said on the call. “It's something we think we can continue to do […] The pipeline still feels really good for 2024 and 2025.”

Shares of Permian Resources (Ticker: PR) were up 2.5% to $15.59 in midday trading Feb. 28. Over the past 6 months, shares have climbed nearly 15%, pushing the company’s market capitalization past $12 billion.