Oil and Gas Co. Significantly Increases Base Dividend
Research Report

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Disclosures for Roth MKM, Permian Resources Corp., September 3, 2024.

Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Disclosures: The price target and rating history for Permian Resources Corp. prior to February 1, 2023 reflect MKM’s published opinion prior to the acquisition of MKM Partners, LLC by Roth Capital Partners, LLC.

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Roth MKM analyst Leo Mariani, in a research report published on September 3, 2024, provided an update on Permian Resources Corp. (PR:NYSE) following the company's announcement of a significant increase in its base dividend and share repurchase authorization. The analyst maintained a Buy rating and a 12-month price target of US$20.00 on the stock.

Permian Resources announced a 150% increase in its base dividend from US$0.06 per share to US$0.15 per share, while eliminating its variable dividend.

Mariani noted, "The new dividend represents a 4.2% current yield. PR announced a US$0.21 base plus variable dividend in conjunction with 2Q24 earnings, so the new yield is a bit lower than last quarter."

Additionally, the company's board of directors authorized a 100% increase to its share buyback authorization from US$500 million to US$1 billion. "PR said that its new buyback plan will remain consistent with its historical activity, which has been fairly minimal," Mariani commented.

The analyst expects Permian Resources to "have a slight positive reaction vs. peers today" in response to these announcements.

Mariani highlighted Permian Resources' strategic focus on the Delaware basin, stating, "PR is a pure play Permian Basin focused E&P entirely focused in the Delaware basin. PR has a sizeable acreage position with around 180,000 net acres, and its production of around 150,000 Boepd is more than 50% oil."

The company's recent milestones include its merger with Colgate Energy, which has resulted in a larger, more leveraged entity with new co-CEOs. Mariani noted this as a potential risk, saying, "The pro forma company will have two new co-CEOs that are generally unknown to the investment community."

Roth MKM's valuation methodology for Permian Resources is based on a multiple of debt-adjusted cash flow (DACF). "Our US$20 price target for PR is based on a 4.7x multiple of our 2025 DACF estimate, which is based on US$80 WTI oil and US$3.00 HH gas," Mariani explained.

With a Buy rating and a price target of US$20.00, representing a potential return of approximately 40% from the price at the time of the report of US$14.24, Roth MKM sees upside potential for Permian Resources.

Mariani concluded by reiterating his positive view on the company, citing "its solid returns of capital including dividends and buybacks, reasonable production growth, and slightly discounted valuation vs. Permian peers."