Permian Resources Corp

Previous wording

The Organization of Petroleum Exporting Countries and other oil producing countries (“OPEC+”) undertook a series of actions in an effort to support commodity prices throughout 2023 in response to global recession concerns, a high interest rate environment, lower than expected demand from China, a regional banking crisis in the U.S. and further geopolitical disruptions. In addition, both Saudi Arabia and Russia announced unilateral production curtailments at separate times during 2023. These actions, coupled with relatively strong global demand and rising tensions in the Middle East, caused crude oil prices to increase during 2023, with NYMEX WTI spot prices reaching a high of $93.68 per barrel on September 27, 2023. However, further concerns of global economic growth and increases in oil and natural gas supply levels resulted in additional price deterioration at the end of 2023 with oil finishing the year at $71.65 per barrel. Similar market conditions continued in the start of the first quarter of 2024, until a reescalation of Middle East tensions caused oil prices to rise with NYMEX WTI finishing the first quarter at $83.17 per barrel.

Current wording

The Organization of Petroleum Exporting Countries and other oil producing countries (“OPEC+”) undertook a series of actions in an effort to support commodity prices throughout 2023 in response to global recession concerns, a high interest rate environment, lower than expected demand from China and a regional banking crisis in the U.S., among other events. In addition, both Saudi Arabia and Russia announced unilateral production curtailments at separate times during 2023. These actions, coupled with relatively strong global demand and rising tensions in the Middle East, caused crude oil prices to increase during 2023, with NYMEX WTI spot prices reaching a high of $93.68 per barrel on September 27, 2023. However, further concerns of global economic growth, inflation and increases in oil and natural gas supply levels resulted in additional price deterioration at the end of 2023 and into 2024. More recently, prices have been positively supported by seasonal peak summer consumption and plans of OPEC+ extending their oil production cuts through the fourth quarter of 2025 resulting in the NYMEX WTI spot price averaging $80.55 per barrel during the second quarter of 2024. Natural gas prices remained low throughout the first half of 2024 driven by an over-supply due to mild winter weather, liquefied natural gas (LNG) project delays and higher than expected natural gas production. Market prices in the Permian Basin were further impacted by low demand as a result of current pipeline capacity constraints out of the basin and additional pipeline maintenance, which lead to negative regional gas prices being realized at the Waha Hub in West Texas (“Waha”) throughout the first half of 2024. Specifically, the Waha price of natural gas averaged negative $0.59 per MMBtu during the second quarter of 2024 leading to negative gas realizations.

Previous wording

Lower commodity prices and lower futures curves for oil and gas prices can result in impairments of our proved oil and natural gas properties or undeveloped acreage and may materially and adversely affect our operating cash flows, liquidity, financial condition, results of operations, future business and operations, and/or our ability to finance planned capital expenditures, which could in turn impact our ability to comply with covenants under our five-year secured revolving credit facility (the “Credit Agreement”) and senior notes. Lower realized prices may also reduce the borrowing base under our Credit

Current wording

Lower commodity prices and lower futures curves for oil and gas prices can result in impairments of our proved oil and natural gas properties or undeveloped acreage and may materially and adversely affect our operating cash flows, liquidity, financial condition, results of operations, future business and operations, and/or our ability to finance planned capital expenditures, which could in turn impact our ability to comply with covenants under our five-year secured revolving credit facility (the “Credit Agreement”) and senior notes. Lower realized prices may also reduce the borrowing base under our Credit Agreement, which is determined at the discretion of the lenders and is based on the collateral value of our proved reserves that have been mortgaged to the lenders. Upon a redetermination, if any borrowings in excess of the revised borrowing capacity were outstanding, we could be forced to immediately repay a portion of the debt outstanding under the Credit Agreement.

Previous wording

Due to the cyclical nature of the oil and gas industry, fluctuating demand for oilfield goods and services can put pressure on the pricing structure within our industry. As commodity prices rise, costs of oilfield goods and services generally also increase; however, during periods of commodity price declines, oilfield costs typically lag and do not adjust downward as fast as oil prices do. In addition, the U.S. inflation rate has been steadily increasing during 2023 and 2024. Inflationary pressures such as these may also result in increases to the costs of our oilfield goods, services and personnel, which can in turn cause our capital expenditures and operating costs to rise.

Current wording

Due to the cyclical nature of the oil and gas industry, fluctuating demand for oilfield goods and services can put pressure on the pricing structure within our industry. As commodity prices rise, costs of oilfield goods and services generally also increase; however, during periods of commodity price declines, oilfield costs typically lag and do not adjust downward as fast as oil prices do. In addition, the U.S. has seen higher than normal inflation during 2023 and 2024. Inflationary pressures such as these may also result in increases to the costs of our oilfield goods, services and personnel, which can in turn cause our capital expenditures and operating costs to rise.

Previous wording

During the three months ended March 31, 2024, we declared and paid a quarterly dividend of $0.05 per share of Class A Common Stock and a quarterly distribution of $0.05 per Class C Common Stock (each of which has an underlying common unit of OpCo (“Common Units”)). Additionally, our Board of Directors declared and paid a variable dividend and distribution of $0.10 per share of Class A Common Stock and Class C Common Stock. The cash dividends and distributions paid to common unitholders totaled $115.5 million for the three months ended March 31, 2024.

Current wording

During the six months ended June 30, 2024, we declared and paid quarterly base dividends totaling $0.11 per share of Class A Common Stock and distributions totaling $0.11 per share of Class C Common Stock (each of which has an underlying common unit of OpCo (“Common Units”)). In addition, during the first half of 2024, we declared and paid variable dividends totaling $0.24 per share of Class A Common Stock and distributions totaling $0.24 per share of Class C Common Stock. The cash dividends and distributions paid to common unitholders totaled $270.1 million for the six months ended June 30, 2024.

Previous wording

During the three months ended March 31, 2024, we paid $31.4 million to repurchase 2.0 million Common Units resulting in an equal number of the underlying shares of Class C Common Stock simultaneously being canceled under our stock repurchase program.

Current wording

During the six months ended June 30, 2024, we paid $61.0 million to repurchase 3.8 million Common Units resulting in an equal number of the underlying shares of Class C Common Stock simultaneously being canceled under our stock repurchase program.

Previous wording

In connection with the spring borrowing base redetermination on April 25, 2024, we entered into the seventh amendment to the Credit Agreement (the “Seventh Amendment”). The Seventh Amendment, among other things, increased the elected commitments under the Credit Agreement to $2.5 billion from $2.0 billion and reaffirmed the borrowing base at $4.0 billion.

Current wording

In connection with the spring borrowing base redetermination in April 2024, we entered into the seventh amendment to the Credit Agreement (the “Seventh Amendment”). The Seventh Amendment, among other things, increased the elected commitments under the Credit Agreement to $2.5 billion from $2.0 billion and reaffirmed the borrowing base at $4.0 billion.

Previous wording

During the three months ended March 31, 2024, we completed multiple acquisitions of oil and natural gas properties for a cumulative adjusted purchase price of $92 million. The acquired assets consist predominately of undeveloped acreage that is directly offsetting our existing assets. These acquisitions are part of our ongoing bolt-on and grassroots acquisition programs.

Current wording

During the six months ended June 30, 2024, we completed multiple acquisitions of oil and natural gas properties for a cumulative adjusted purchase price of approximately $355 million. These acquisitions are part of our ongoing bolt-on and grassroots acquisition programs.

Previous wording

(1) Natural gas sales for the three months ended March 31, 2024 include $25.3 million of gathering, processing and transportation costs (“GP&T”) that are reflected as a reduction to natural gas sales and $11.3 million for the three months ended March 31, 2023. Natural gas average sales price, however, excludes $0.49 per Mcf of such GP&T charges for the three months ended March 31, 2024 and $0.47 per Mcf for the three months ended March 31, 2023.

Current wording

(1) Natural gas sales for the three months ended June 30, 2024 include $23.6 million of gathering, processing and transportation costs (“GP&T”) that are reflected as a reduction to natural gas sales and $7.4 million for the three months ended June 30, 2023. Natural gas average sales price, however, excludes $0.43 per Mcf of such GP&T charges for the three months ended June 30, 2024 and $0.30 per Mcf for the three months ended June 30, 2023.

Previous wording

(2) NGL sales for the three months ended March 31, 2024 include $22.9 million of GP&T that are reflected as a reduction to NGL sales and $16.1 million for the three months ended March 31, 2023. NGL average sales price, however, excludes $3.45 per Bbl of such GP&T charges for the three months ended March 31, 2024 and $5.77 per Bbl for the three months ended March 31, 2023.

Current wording

(2) NGL sales for the three months ended June 30, 2024 include $18.8 million of GP&T that are reflected as a reduction to NGL sales and $16.5 million for the three months ended June 30, 2023. NGL average sales price, however, excludes $2.44 per Bbl of such GP&T charges for the three months ended June 30, 2024 and $5.09 per Bbl for the three months ended June 30, 2023.

Previous wording

Oil, Natural Gas and NGL Sales Revenues. Total net revenues for the three months ended March 31, 2024 were $626.7 million (or 102%) higher than total net revenues for the three months ended March 31, 2023. Revenues are a function of oil, natural gas and NGL volumes sold and average commodity prices realized.

Current wording

Oil, Natural Gas and NGL Sales Revenues. Total net revenues for the three months ended June 30, 2024 were $622.7 million (or 100%) higher than total net revenues for the three months ended June 30, 2023. Revenues are a function of oil, natural gas and NGL volumes sold and average commodity prices realized.

Previous wording

Net production volumes for oil, natural gas and NGLs increased 96%, 116% and 137%, respectively, between periods. The increase in oil production resulted from placing 212 wells online since the first quarter of 2023. Oil production also benefited from wells acquired in the Earthstone Merger. These oil volume increases were partially offset by normal production decline across our existing wells. Natural gas and NGLs are produced concurrently with our crude oil volumes, which typically result in a high correlation between fluctuations in oil quantities sold and natural gas and NGL quantities sold driving the 116% and 137% respective increases in gas and NGL volumes between periods. The higher increase in gas and NGL volumes between periods as compared to the 96% increase in oil volumes was due to the producing wells acquired in the Earthstone Merger, which have a higher gas-to-oil ratio than our existing production base, and this has resulted in more volumes of gas and NGLs being added to our total production stream since the closing of the Earthstone Merger on November 1, 2023.

Current wording

Net production volumes for oil, natural gas and NGLs increased 81%, 120% and 139%, respectively, between periods. The increase in oil production resulted from additional production added from wells acquired in the Earthstone Merger and from placing additional wells online since the second quarter of 2023. These oil volume increases were partially offset by normal production declines across our existing wells. Natural gas and NGLs are produced concurrently with our crude oil volumes, which typically result in a high correlation between fluctuations in oil quantities sold and natural gas and NGL quantities sold driving the 120% and 139% respective increases in gas and NGL volumes between periods. The higher increase in gas and NGL volumes between periods as compared to the 81% increase in oil volumes was due to the producing wells acquired in the Earthstone Merger, which have a higher gas-to-oil ratio than our existing production base, and this has resulted in more volumes of gas and NGLs being added to our total production stream since the closing of the Earthstone Merger on November 1, 2023.

Previous wording

These increases were partially offset by decreases in the average realized sales prices for natural gas and NGLs, which decreased 31% and 2%, respectively, in the first quarter of 2024 compared to the same 2023 period. The average realized sales price of natural gas decreased 31% mainly due to larger gas differentials in the first quarter of 2024 compared to the same 2023 period as well as 10% lower average NYMEX gas prices between periods. The 2% decrease in average realized NGL prices between periods was primarily attributable to slightly lower Mont Belvieu spot prices for plant products in the first quarter of 2024 as compared to the first quarter of 2023.

Current wording

Total net revenues increases were also driven by higher average realized sales prices of oil and NGLs, which increased 12% and 9%, respectively, in the second quarter of 2024 compared to the same 2023 period. The 12% increase in the average realized oil price was mainly the result of higher NYMEX crude prices as well as improved oil differentials between periods. The 9% increase in average realized NGL prices between periods was primarily attributable to higher Mont Belvieu spot prices for plant products in the second quarter of 2024 as compared to the second quarter of 2023.

Previous wording

Lease Operating Expenses. Lease operating expenses (“LOE”) for the three months ended March 31, 2024 increased $94.1 million compared to the three months ended March 31, 2023. Higher LOE for the first quarter of 2024 was primarily related to our significantly higher well count between periods due to (i) 1,190 gross operated horizontal wells acquired in the Earthstone Merger on November 1, 2023, and (ii) 212 wells placed on production since March 31, 2023.

Current wording

Lease Operating Expenses. Lease operating expenses (“LOE”) for the three months ended June 30, 2024 increased $76.7 million compared to the three months ended June 30, 2023. Higher LOE for the second quarter of 2024 was primarily related to our significantly higher well count between periods due to (i) wells acquired in the Earthstone Merger on November 1, 2023; and (ii) additional wells placed on production since June 30, 2023.

Previous wording

Severance and Ad Valorem Taxes. Severance and ad valorem taxes for the three months ended March 31, 2024 increased $47.7 million compared to the three months ended March 31, 2023. Severance taxes are based on the market value of our oil and gas production at the wellhead, while ad valorem taxes are generally based on the assessed taxable value of proved developed oil and gas properties and vary across the different counties in which we operate. Severance taxes for the first quarter of 2024 increased $39.9 million compared to the same 2023 period primarily due to higher oil, natural gas and NGL revenues between periods. Ad valorem taxes between periods also increased by $7.7 million, mainly due to higher tax assessment rates on our oil and gas reserve values and additional expense incurred on the proved developed properties acquired in the Earthstone Merger on November 1, 2023.

Current wording

Severance and Ad Valorem Taxes. Severance and ad valorem taxes for the three months ended June 30, 2024 increased $44.1 million compared to the three months ended June 30, 2023. Severance taxes are based on the market value of our oil and gas production at the wellhead, while ad valorem taxes are generally based on the assessed taxable value of proved developed oil and gas properties and vary across the different counties in which we operate. Severance taxes for the second quarter of 2024 increased $40.0 million compared to the same 2023 period primarily due to higher total operating revenues between periods. Ad valorem taxes between periods also increased by $4.1 million, mainly due to additional expense incurred on the proved developed properties acquired in the Earthstone Merger.

Previous wording

For the three months ended March 31, 2024, DD&A expense amounted to $410.2 million, an increase of $222.0 million over the same 2023 period. The primary factor contributing to higher DD&A expense in 2024 was the increase in our overall production volumes between periods, which increased DD&A expense by $207.1 million, while our higher DD&A rate of $14.11 per BOE increased DD&A expense by $14.9 million between periods.

Current wording

For the three months ended June 30, 2024, DD&A expense amounted to $426.4 million, an increase of $210.7 million over the same 2023 period. The primary factor contributing to higher DD&A expense in 2024 was the increase in our overall production volumes between periods, which increased DD&A expense by $224.9 million, while our lower DD&A rate of $13.83 per BOE decreased DD&A expense by $14.2 million between periods.

Previous wording

Our DD&A rate can fluctuate as a result of finding and development costs incurred, acquisitions, impairments, as well as changes in proved developed and proved undeveloped reserves. DD&A per BOE was $14.11 for the first quarter of 2024 as compared to $13.60 for the same period 2023.

Current wording

Our DD&A rate can fluctuate as a result of finding and development costs incurred, acquisitions, impairments, as well as changes in proved developed and proved undeveloped reserves. DD&A per BOE was $13.83 for the second quarter of 2024 as compared to $14.29 for the same period 2023, a 3% decline between periods.

Previous wording

G&A expenses for the three months ended March 31, 2024 were $37.4 million compared to $35.5 million for the three months ended March 31, 2023. Higher G&A in the first quarter of 2024 was the result of an increase of $9.5 million in cash G&A between periods primarily due to (i) higher payroll and employee-related costs associated with our G&A headcount, which increased from 168 as of March 31, 2023 to 254 as of March 31, 2024 stemming from the Earthstone Merger; and (ii) higher professional and legal fees between periods. These increases were partially offset by a $7.6 million decrease in stock-based compensation between periods. This decrease in stock-based compensation was primarily the result of $6.3 million in additional expense during the three months ended March 31, 2023 related to accelerated vestings of equity awards for employees terminated in connection with the merger with Colgate Energy Partners III, LLC (the “Colgate Merger”) on September 1, 2022. Refer to Note 6—Stock-Based Compensationfor additional information regarding these awards.

Current wording

G&A expenses for the three months ended June 30, 2024 were $48.7 million compared to $52.7 million for the three months ended June 30, 2023. Lower G&A in the second quarter of 2024 was the result of a $12.6 million decrease in stock-based compensation between periods related to less expense associated with accelerated vestings of equity awards primarily for employees terminated in connection with the merger with Colgate Energy Partners III, LLC (the “Colgate Merger”) on September 1, 2022. Refer to Note 6—Stock-Based Compensationfor additional information regarding these award accelerations and modifications. This decrease was partially offset by an increase of $8.6 million in cash G&A between periods primarily due to (i) higher payroll and employee-related costs associated with our higher G&A headcount, which increased from 175 as of June 30, 2023 to 246 as of June 30, 2024 stemming primarily from the Earthstone Merger; and (ii) higher software and professional expenses between periods also related to our higher headcount and corporate growth following the Earthstone Merger. While cash G&A increased between periods, on a per Boe basis, our Cash G&A rate decreased 27% from $1.17 per Boe during the three months ended June 30, 2023 to $0.85 per Boe during the three months ended June 30, 2024 as a result of improved operational execution and the realization of cost synergies related to the Earthstone Merger.

Previous wording

Merger and integration expense. Merger and integration expense incurred for the three months ended March 31, 2024 was $11.1 million. These charges incurred during the 2024 period related to the Earthstone Merger that closed on November 1, 2023 and consisted of (i) $8.1 million in severance and related benefits associated with employees that were terminated in connection with the Earthstone Merger; and (ii) $3.0 million from software integration, consultancy and other professional fees.

Current wording

Merger and integration expense. Merger and integration expense incurred for the three months ended June 30, 2024 was $6.9 million. These charges incurred during the 2024 period mainly related to the Earthstone Merger that closed on November 1, 2023 and consisted of (i) $5.1 million in severance and related benefits associated with employees that were terminated in connection with our corporate mergers; and (ii) $1.8 million from software integration, consultancy and other professional fees.

Previous wording

Merger and integration expense incurred during the three months ended March 31, 2023 was $13.3 million. These charges were related to the Colgate Merger that closed on September 1, 2022 and consisted of (i) $11.1 million in severance and related benefits associated with employees that were terminated in connection with the Colgate Merger; and (ii) $2.2 million from associated consultancy, legal and accounting fees.

Current wording

Merger and integration expense incurred during the three months ended June 30, 2023 was $4.4 million. These charges were related to the Colgate Merger that closed on September 1, 2022 and consisted of (i) $2.6 million in severance and related benefits associated with employees that were terminated in connection with the Colgate Merger; and (ii) $1.8 million from associated consultancy, legal and accounting fees.

Previous wording

Interest expense increased $35.8 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 primarily due to (i) $23.3 million in additional interest costs on the senior notes we assumed in the Earthstone Merger; and (ii) $17.5 million in interest incurred on our Senior Notes due 2032 that were issued in September 2023 and December 2023. These increases were partially offset by less interest expense incurred on our credit facility due to lower weighted average borrowings outstanding during the 2024 period.

Current wording

Interest expense increased $38.6 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 primarily due to (i) $23.3 million in additional interest costs on the senior notes we assumed in the Earthstone Merger; and (ii) $17.5 million in interest incurred on our 2032 Senior Notes that were issued in September 2023 and December 2023. These increases were partially offset by the redemption of our 2027 6.875% Senior Notes in April 2024 that resulted in $5.9 million less interest incurred period over period (refer to Note 4—Long-Term Debtfor additional information regarding the senior note redemption).

Previous wording

Our provisions for income taxes for the three months ended March 31, 2024 and 2023 differs from the amounts that would be provided by applying the U.S. federal statutory rate of 21% to pre-tax book income primarily due to (i) the portion of pre-tax net income that is attributable to our non-controlling interest and which is therefore not taxable to the Company; (ii) other permanent differences; (iii) state income taxes; and (iv) changes during the period in our deferred tax asset valuation allowance, if any.

Current wording

Our provisions for income taxes for the three months ended June 30, 2024 and 2023 differs from the amounts that would be provided by applying the U.S. federal statutory rate of 21% to pre-tax book income primarily due to (i) the portion of pre-tax net income that is attributable to our non-controlling interest and which is therefore not taxable to the Company; (ii) other permanent differences; and (iii) state income taxes.

Previous wording

For the three months ended March 31, 2024, we generated pre-tax net income of $278.6 million and recorded income tax expense of $49.0 million. During the three months ended March 31, 2023, we generated pre-tax net income of $254.1 million and recorded income tax expense of $34.3 million. The primary factor decreasing our income tax expense below the U.S. statutory rate for both periods was the portion of pre-tax income that was attributable to our non-controlling interest partners and not taxable to the Company.

Current wording

For the three months ended June 30, 2024, we generated pre-tax net income of $391.2 million and recorded income tax expense of $82.3 million. During the three months ended June 30, 2023, we generated pre-tax net income of $175.5 million and recorded income tax expense of $26.5 million. The primary factor decreasing our income tax expense below the U.S. statutory rate for both periods was the portion of pre-tax income that was attributable to our non-controlling interest partners and not taxable to the Company.

Previous wording

Total net revenues increases were also driven by a higher average realized sales price of oil, which increased 2% in the first quarter of 2024 compared to the same 2023 period. The 2% increase in the average realized oil price was mainly the result of higher NYMEX crude prices between periods.

Current wording

Total net revenues increases were also driven by higher average realized sales prices of oil and NGLs, which increased 7% and 3%, respectively, in the first half of 2024 compared to the same 2023 period. The 7% increase in the average realized oil price was mainly the result of higher NYMEX crude prices as well as improved oil differentials between periods. While the 3% increase in average realized NGL prices between periods was primarily attributable to higher Mont Belvieu spot prices for plant products in the first half of 2024 as compared to the first half of 2023.

Previous wording

LOE per Boe was $5.80 for the first quarter of 2024, which represents an increase of $0.42 per Boe (or 8%) from the first quarter of 2023. This increase was primarily driven by (i) higher costs associated with wellhead equipment rental rates and (ii) higher water disposal rates between periods, resulting from the sale of our operated saltwater disposal wells and associated produced water infrastructure in March 2023 (see Note 2—Acquisitions and Divestitures for additional information on this divestiture). This increase was partially offset by lower semi-variable well costs, such as wellhead chemicals, and electricity that resulted from operational efficiencies.

Current wording

LOE per Boe was $5.48 for the six months ended June 30, 2024, which represents an increase of $0.04 per Boe (or 1%) from the six months ended June 30, 2023. This increase was primarily driven by higher water disposal rates between periods, resulting from the sale of our operated saltwater disposal wells and associated produced water infrastructure in March 2023 (see Note 2—Acquisitions and Divestitures for additional information on this divestiture), slightly offset by lower semi-variable well costs, such as wellhead chemicals and electrical expense, that resulted from operational efficiencies.

Previous wording

Gathering, Processing and Transportation Expenses. Gathering, processing and transportation costs (“GP&T”) for the three months ended March 31, 2024 increased $23.6 million as compared to the three months ended March 31, 2023. This increase in expense was mainly attributable to higher natural gas and NGL volumes sold between periods, which in turn resulted in a higher amount of plant processing fees and gathering costs being incurred. Additionally, GP&T increased on a per Boe basis from $1.12 for the first quarter of 2023 to $1.34 for the first quarter of 2024. The increase in rate was mainly attributable to an increase in low pressure gas gathering expense between periods to transport gas to a third party processing facility in New Mexico.

Current wording

Gathering, Processing and Transportation Expenses. GP&T for the six months ended June 30, 2024 increased $45.6 million compared to the six months ended June 30, 2023. This increase in expense was mainly attributable to higher natural gas and NGL volumes sold between periods, which in turn resulted in a higher amount of plant processing fees and gathering costs being incurred. Additionally, GP&T increased on a per Boe basis from $1.29 for the first half of 2023 to $1.38 for the first half of 2024. The increase in rate was mainly attributable to an increase in low pressure gas gathering expense between periods to transport gas to a third party processing facility in New Mexico.

Previous wording

Exploration and other expenses were $11.5 million for the three months ended March 31, 2024 compared to $4.4 million for the three months ended March 31, 2023. Exploration and other expenses mainly consist of topographical studies, geographical and geophysical (“G&G”) projects, salaries and expenses of G&G personnel and include other operating costs. The period over period increase was primarily related to (i) an estimated net contingency loss of $6.5 million recorded during the first quarter of 2024 associated with disputed charges that have been in legal dispute and stemmed from a severe winter storm impacting the Permian Basin in February 2021 (refer to Note 12—Commitments and Contingenciesfor additional information regarding the contingency loss); and (ii) higher G&G personnel costs associated with increased headcount.

Current wording

Exploration and other expenses were $17.5 million for the six months ended June 30, 2024 compared to $9.6 million for the same prior year period. Exploration and other expenses mainly consist of topographical studies, G&G projects, salaries and expenses of G&G personnel and includes other operating costs. The period over period increase was primarily related to (i) an estimated net contingency loss of $6.5 million recorded during 2024 associated with disputed charges that have been in legal dispute and stemmed from a severe winter storm impacting the Permian Basin in February 2021 (refer to Note 12—Commitments and Contingenciesfor additional information regarding the contingency loss); (ii) $2.5 million in costs incurred in 2024 associated with a nonrecurring legal settlement; and (iii) higher G&G personnel costs associated with increased headcount. These increases were partially offset by a decrease in costs incurred on G&G projects and seismic studies in 2024.

Previous wording

Our weighted average borrowings outstanding under our Credit Agreement were $14.5 million and $455.6 million for the three months ended March 31, 2024 and 2023, respectively. Our Credit Agreement’s weighted average effective interest rate increased to 7.5% from 6.7% for the three months ended March 31, 2024 and 2023, respectively, due to higher rates on our variable-rate borrowings between periods.

Current wording

Our weighted average borrowings outstanding under our Credit Agreement were $158.8 million versus $412.7 million for the first half of 2024 and 2023, respectively. Our Credit Agreement’s weighted average effective interest rate was 7.3% and 6.9% for the six months ended June 30, 2024 and 2023, respectively, due to higher rates on our variable-rate borrowings between periods.

Previous wording

We continually evaluate our capital needs and compare them to our capital resources. Our total cash capital expenditures incurred for the three months ended March 31, 2024 were $519.6 million. We expect our total drilling, completion and facilities cash capital expenditures budget for 2024 to be between $1.9 billion to $2.1 billion. We funded our capital expenditures for the three months ended March 31, 2024 entirely from cash flows from operations, and we expect to fund the remainder of our 2024 capital expenditures budget entirely from cash flows from operations given our anticipated level of oil and gas production, current commodity prices and our commodity hedge positions in place.

Current wording

We continually evaluate our capital needs and compare them to our capital resources. Our total cash capital expenditures incurred for development during the six months ended June 30, 2024 were $1.0 billion. We expect our total drilling, completion and facilities cash capital expenditures budget for 2024 to be between $1.9 billion to $2.1 billion. We funded our capital expenditures for the six months ended June 30, 2024 entirely from cash flows from operations, and we expect to fund the remainder of our 2024 capital expenditures budget entirely from cash flows from operations given our anticipated level of oil and gas production, current commodity prices and our commodity hedge positions in place.

Previous wording

Because we are the operator of a high percentage of our acreage, we can control the amount and timing of our capital expenditures. Accordingly, we can choose to defer or accelerate a portion of our planned capital expenditures depending on a variety of factors, including but not limited to: prevailing and anticipated prices for oil and natural gas; oil storage or transportation constraints; the success of our drilling activities; the availability of necessary equipment, infrastructure and capital; the receipt and timing of required regulatory permits and approvals; seasonal conditions; property or land acquisition costs; and the level of participation by other working interest owners.

Current wording

We are the operator of a high percentage of our acreage and can control the amount and timing of our capital expenditures. Accordingly, we can choose to defer or accelerate a portion of our planned capital expenditures depending on a variety of factors, including but not limited to: (i) prevailing and anticipated prices for oil and natural gas; (ii) oil storage or transportation constraints; (iii) the success of our drilling activities; (iv) the availability of necessary equipment, infrastructure and capital; (v) the receipt and timing of required regulatory permits and approvals; (vi) seasonal conditions; (vii) property or land acquisition costs; and (viii) the level of participation by other working interest owners.

Previous wording

We plan to return capital to shareholders through a combination of base dividends plus a variable return program, including variable dividends, share repurchases or a combination of both. During the three months ended March 31, 2024, we declared and paid a quarterly cash dividend of $0.05 per share of Class A Common Stock and a quarterly cash distribution of $0.05 per Common Unit of OpCo. In addition, during the quarter, our Board of Directors also declared and paid variable cash dividends of $0.10 per share of Class A Common Stock and variable cash distributions of $0.10 per Common Unit of OpCo. The cash dividends and distributions paid to common unitholders totaled $115.5 million for the three months ended March 31, 2024. Additionally, we repurchased 2.0 million shares of Class C Common Stock for $31.4 million under our stock repurchase program during the three months ended March 31, 2024.

Current wording

We plan to return capital to shareholders through a combination of a quarterly base dividend plus a variable return program, including variable dividends, share repurchases or a combination of both. During the six months ended June 30, 2024, we declared and paid quarterly base dividends totaling $0.11 per share of Class A Common Stock and distributions totaling $0.11 per share of Class C Common Stock (each of which has an underlying Common Unit of OpCo). In addition, during the first half of 2024, we declared and paid variable dividends totaling $0.24 per share of Class A Common Stock and distributions totaling $0.24 per share of Class C Common Stock. The cash dividends and distributions paid to common unitholders totaled $270.1 million for the six months ended June 30, 2024. Additionally, we repurchased 3.8 million shares of Class C Common Stock for $61.0 million under our stock repurchase program during the six months ended June 30, 2024.

Previous wording

For the three months ended March 31, 2024, we generated $647.6 million of cash from operating activities, an increase of $209.4 million from the same period in 2023. Cash provided by operating activities increased primarily due to higher production volumes and higher realized price of oil for the three months ended March 31, 2024 as compared to the same 2023 period. These increasing factors were partially offset by higher lease operating expenses, severance and ad valorem taxes, GP&T, cash G&A, interest expense and lower realized prices for gas and NGLs as well as the timing of both our supplier payments and collections on our receivables during the three months ended March 31, 2024 as compared to the same 2023 period. Refer to “Results of Operations” for more information on the impact of volumes and prices on revenues and on fluctuations in our operating costs between periods.

Current wording

For the six months ended June 30, 2024, we generated $1.6 billion of cash from operating activities, an increase of $699.3 million from the same period in 2023. Cash provided by operating activities increased primarily due to higher production volumes and higher realized price of oil and NGLs for the six months ended June 30, 2024 as compared to the same 2023 period. These increasing factors were partially offset by higher lease operating expenses, severance and ad valorem taxes, GP&T, cash

Previous wording

During the three months ended March 31, 2024, cash flows from operating activities, cash on hand and net borrowings under our revolving credit facility were used to: fund $519.6 million of drilling and development cash capital expenditures; pay $115.5 million in dividends and cash distributions to our shareholders and holders of our Common Units; fund acquisitions of oil and gas properties of $97.0 million; and repurchase $31.5 million of shares of our common stock.

Current wording

During the six months ended June 30, 2024, cash flows from operating activities, cash on hand and net borrowings under our revolving credit facility were used to (i) fund $1.0 billion of drilling and development cash capital expenditures; (ii) redeem $356.4 million of our 2027 6.875% Senior Notes; (iii) pay $270.1 million in dividends and cash distributions to our shareholders and holders of our Common Units; (iv) fund acquisitions of oil and gas properties of $262.3 million; and (v) repurchase $61.0 million of our common stock.

Previous wording

During the three months ended March 31, 2023, cash flows from operating activities, cash on hand and proceeds of $65.1 million from sales of oil and natural gas properties were used to: fund $315.3 million of drilling and development cash capital expenditures; repay net borrowings of $100 million under our Credit Agreement; fund acquisitions of oil and gas properties of $100.8 million; repurchase $29.4 million of shares of our common stock; and pay $28.5 million in dividends and cash distributions to our shareholders and holders of our Common Units.

Current wording

During the six months ended June 30, 2023, cash flows from operating activities, cash on hand and sales proceeds together with contingent consideration of $124.0 million from sales of oil and natural gas properties were used to (i) fund $686.6 million of drilling and development cash capital expenditures; (ii) repay net borrowings of $85 million under our Credit Agreement; (iii) fund acquisitions of oil and gas properties of $107.8 million; (iv) pay $85.5 million in dividends and cash distributions to our shareholders and holders of our Common Units; (v) repurchase $29.4 million our common stock; and (vi) purchase an office building in Midland, Texas for $27.5 million.

Previous wording

OpCo, our consolidated subsidiary, has a five-year secured revolving Credit Agreement with a syndicate of banks maturing in February 2027 that, as of March 31, 2024, had a borrowing base of $4.0 billion and elected commitments of $2.0 billion. As of March 31, 2024, we had $60.0 million in borrowings outstanding and $1.9 billion in available borrowing capacity, which was net of $5.6 million in letters of credit outstanding.

Current wording

OpCo, our consolidated subsidiary, has a five-year secured revolving Credit Agreement with a syndicate of banks maturing in February 2027 that, as of June 30, 2024, had a borrowing base of $4.0 billion and elected commitments of $2.5 billion. As of June 30, 2024, we had $375.0 million in borrowings outstanding and $2.1 billion in available borrowing capacity, which was net of $5.6 million in letters of credit outstanding.

Previous wording

(ii) a leverage ratio, as defined within the Credit Agreement as the ratio of total funded debt to consolidated EBITDAX (as defined within the Credit Agreement) for the most recent quarter annualized, of not greater than 3.5 to 1.0.

Current wording

(ii) a leverage ratio, which is the ratio of total funded debt to consolidated EBITDAX (with such terms defined within the Credit Agreement) for the most recent quarter annualized, of not greater than 3.5 to 1.0.

Previous wording

The Convertible Senior Notes bear interest at an annual rate of 3.25% and are due on April 1, 2028 unless earlier repurchased, redeemed or converted. The Convertible Senior Notes may become convertible prior to April 1, 2028, upon the occurrence of certain events or conditions being met as disclosed in Note 4—Long-Term Debt under Part I, Item I of this Quarterly Report. As of March 31, 2024, certain conditions have been met, and as a result, noteholders have the right to convert their Convertible Senior Notes. OpCo can settle the Convertible Senior Notes by paying or delivering cash, shares of the Class A

Current wording

The Convertible Senior Notes bear interest at an annual rate of 3.25% and are due on April 1, 2028 unless earlier repurchased, redeemed or converted. The Convertible Senior Notes may become convertible prior to April 1, 2028, upon the occurrence of certain events or conditions being met as disclosed in Note 4—Long-Term Debt under Part I, Item I of this

Previous wording

On September 12, 2023, OpCo issued $500 million of 7.00% senior notes due 2032 (the “Existing Notes”) in a 144A private placement. On December 13, 2023, OpCo issued additional notes under the indenture dated September 12, 2023 that totaled an additional $500 million of 7.00% senior notes (together with the Existing Notes, the “2032 Senior Notes”), which resulted in aggregate net proceeds of $982.5 million, after deducting the issuance discount of $2.5 million and debt issuance costs of $15.0 million. The 2032 Senior Notes are treated as a single series of securities and vote together as a single class, and have substantially identical terms, other than the issue date and issue price.

Current wording

On September 12, 2023, OpCo issued $500 million of 7.00% senior notes due 2032 (the “Original 2032 Notes”) in a 144A private placement. On December 13, 2023, OpCo issued additional notes under the indenture dated September 12, 2023 that totaled an additional $500 million of 7.00% senior notes (together with the Original 2032 Notes, the “2032 Senior Notes”), which resulted in aggregate net proceeds of $982.5 million, after deducting the issuance discount of $2.5 million and debt issuance costs of $15.0 million. The 2032 Senior Notes are treated as a single series of securities and vote together as a single class, and have substantially identical terms, other than the issue date and issue price.

Previous wording

On September 1, 2022, in connection with the Colgate Merger, OpCo entered into supplemental indentures whereby all of Colgate’s outstanding senior notes were assumed at the Colgate Merger closing date and became the senior unsecured debt obligations of OpCo. The senior notes assumed by OpCo included $300 million of 7.75% senior notes due 2026 (the “2026 7.75% Senior Notes”) and $700 million of 5.875% senior notes due 2029 (the “2029 Senior Notes”). We recorded the acquired senior notes at their fair value as of the Colgate Merger closing, which were equal to 100% of par for the 2026 7.75% Senior Notes and 93.68% of par (a $49.3 million debt discount) for the 2029 Senior Notes.

Current wording

On September 1, 2022, in connection with the Colgate Merger, OpCo entered into supplemental indentures whereby all of Colgate’s outstanding senior notes were assumed at the Colgate Merger closing date and became the senior unsecured debt obligations of OpCo. The senior notes assumed by OpCo included $300 million of 7.75% senior notes due 2026 (the “2026 7.75% Senior Notes”) and $700 million of 5.875% senior notes due 2029 (the “2029 Senior Notes”). We recorded the acquired senior notes at their fair value as of the Colgate Merger closing, which were equal to 100% of par for the 2026 7.75% Senior Notes and 93.68% of par (a $49.3 million debt discount) for the 2029 Senior Notes. Refer to Note 14—Subsequent Eventsfor additional information regarding the Tender Offer and redemption of the 2026 7.75% Senior Notes subsequent to the period ended June 30, 2024.