Permian Resources Curtails Gas to Chase Oil Prices, Cuts Debt
Permian Resources posted adjusted EBITDAX of $1,343.5 million in the second quarter as it curtailed natural gas output to avoid negative Waha prices and captured a 38% jump in oil realizations.
Permian Resources (PR) reported second-quarter adjusted EBITDAX of $1,343.5 million, up 28% from $1,047.7 million in the first quarter and 50% higher than a year earlier, as the Permian Basin operator leaned into oil growth while deliberately shutting in gas exposed to collapsing regional prices.
The quarter's defining move was a curtailment strategy the company had not deployed in prior periods. Waha natural gas, the benchmark for West Texas production, averaged $(3.14) per thousand cubic feet in the second quarter and traded as low as $(9.52), a reversal from the $1.21 Waha premium and $0.10 realized gas price the company posted in the first quarter. Rather than sell high-gas-to-oil-ratio barrels into that market, Permian Resources cut natural gas volumes 21% to 552,885 thousand cubic feet a day and NGL volumes 17% to 86,191 barrels a day, pulling total production down 9% to 376.4 thousand barrels of oil equivalent a day even as oil output climbed.
Oil production rose 3% sequentially to 198,071 barrels a day, extending a climb from 188,600 barrels a day in the fourth quarter, and realizations for that oil surged 38% to $97.81 a barrel from $70.91. That pricing more than offset the lost gas and NGL volumes: adjusted free cash flow rose 46% to $751 million from $513 million in the first quarter, even as total output fell.
Costs moved higher alongside the activity increase. Controllable cash costs rose to $7.49 a barrel of oil equivalent from $7.32, and lease operating expenses climbed to $5.55 a barrel from $5.19 in the prior quarter and $5.36 a year earlier, though both remained inside or below the midpoint of full-year guidance. Gathering, processing and transportation costs fell to $1.07 a barrel from $1.36, partly reflecting the lower gas volumes moving through that system. Cash capital expenditures rose 12% to $521 million from $466 million, a jump tied to more than a 50% increase in workover projects aimed at capturing the higher oil price.
Permian Resources also accelerated its ground-game acquisition program, closing roughly 190 small transactions for $1.05 billion year-to-date, covering 54,000 net acres and 20,000 net royalty acres, compared with about 40 deals worth $205 million in the first quarter alone. On July 31, the company closed its Ward County bolt-on, adding about 5,000 barrels of oil equivalent a day of existing production that is roughly half oil, the first 2026 deal described as carrying producing volumes rather than the undeveloped acreage that characterized its earlier transactions.
The company raised full-year 2026 oil production guidance for a second time to a midpoint of 199.0 thousand barrels a day, up from 192.5 thousand barrels guided in the first quarter and 10.0 thousand barrels above the initial February range of 186,000 to 192,000. It also lifted full-year capital spending guidance to a midpoint of $1.95 billion, from the $1.75 billion to $1.95 billion range set in February, citing higher working interest from ground-game acquisitions plus about $25 million tied to the Ward County deal. Working interest guidance for 2026 was raised to above 80%, a metric disclosed for the first time as a specific driver of the production increase.
Net income attributable to Class A stock rose to $792.5 million from $43.6 million in the first quarter, a swing attributed largely to a $256.6 million non-cash derivative gain in the second quarter compared with a $369.3 million non-cash derivative loss three months earlier. Leverage fell to roughly 0.5 times net debt to annualized EBITDAX from 0.8 times in the first quarter and 0.9 times at year-end, after Permian Resources redeemed $550 million of legacy Earthstone senior notes in the quarter and an additional $325 million on July 15, a move that would cut annual cash interest expense by about $75 million.