E&P 1Q26 Wrap - APA, BKV, MGY, MNR, PR, REPX, SM

Research evidence excerpt

E&P 1Q26 Wrap - APA, BKV, MGY, MNR, PR, REPX, SM

d 196.1 kbd (vs. 190-195 kbd updated guidance) from capex of $1.92 Bn. This drives FCF of $2.3Bn and implies a

15% yield. We reiterate our Buy rating and maintain our $25/sh PT.

Other details from the call that standout. On the call, mgmt characterized the Delaware A&D environment as "robust" and of significantly

higher quality than previous years, noting an increased velocity of larger asset packages hitting the market for the summer and fall. The

company highlighted a strategic "sweet spot" for deals in the $600MM - $800MM range while sustaining its consistent "ground game,"

which deployed $200MM across 40 transactions this quarter. Leadership emphasized a strict "right price" underwriting discipline, requiring

any new assets to be accretive to free cash flow (FCF) per share and superior to their existing low-cost organic inventory. Ultimately,

PR views disciplined A&D as a critical pillar to defend its 30% FCF/share CAGR, leveraging in-basin knowledge to extract value from

acreage that competitors might misprice. During the call, PR also highlighted record recycled water utilization rate of approximately 70%

in completion operations, a material step-up that mgmt identifies as a primary driver for their new company-record completion costs. PR

characterized the initiative as "extremely efficient," providing a dual tailwind by reducing both upfront completion capex and recurring

LOE. Strategically, the shift to recycling serves as a critical hedge against Delaware Basin disposal capacity and pore space constraints,

though PR maintains further insulation through midstream contracts that shift disposal liability to well-capitalized partners. Management