Permian Resources Announces Third Quarter 2022 Results

MIDLAND, Texas, Nov. 08, 2022 (GLOBE NEWSWIRE) -- Permian Resources Corporation (“Permian Resources” or the “Company”) (NYSE: PR) today announced third quarter 2022 financial and operational results. On September 1, 2022, Permian Resources completed the successful combination of Centennial Resource Development, Inc. (“Centennial”) and Colgate Energy Partners III, LLC (“Colgate”).

Third quarter 2022 information discussed within this release represents legacy Centennial results for the months of July and August and combined Centennial and Colgate results for the month of September, unless otherwise specified.

Recent Financial and Operational Highlights

• Closed transformational merger of equals, creating largest Delaware Basin pure-play E&P
• Reported strong net cash provided by operating activities of $388 million and adjusted free cash flow¹ of $159 million
• Announced robust return of capital program, returning at least 50% of free cash flow after base dividend
• Announced inaugural quarterly base dividend of $0.05 per share
• Executing on ~$65 million annual synergy target through operational best practices and enhanced scale
• Maintained strong balance sheet and low leverage profile

Management Commentary

“Our solid quarterly results demonstrate our strength as a newly combined company. With the merger complete and integration progressing smoothly, the team has accelerated the implementation of operational best practices to deliver on our synergy targets,” said Will Hickey, Co-CEO of Permian Resources. “During the quarter, our operations team produced strong well results while also prioritizing cost control. As a result, we remain on-track to achieve our fourth quarter 2022 and full year 2023 targets.”

“Having recently closed the merger in September, the combined team has been hard at work, immersing itself in the new business to position Permian Resources for maximum value creation,” said James Walter, Co-CEO of the Company. “We now have significant momentum underpinned by our robust free cash flow outlook, enhanced operating scale and improved cost structure and are excited to begin returning a significant amount of capital to our shareholders.”

Third Quarter Results

As a reminder, third quarter 2022 information discussed within this release represents legacy Centennial results for the months of July and August and combined Centennial and Colgate results for the month of September, unless otherwise specified.

For the quarter, Permian Resources generated net cash provided by operating activities of $388.3 million and adjusted free cash flow¹ of $159.3 million. The Company also reported net income attributable to Class A Common Stock during the third quarter of $224.4 million, or $0.70 per diluted share, compared to $37.1 million, or $0.12 per diluted share, in the prior year period.

Average daily crude oil production for the third quarter was 48,499 barrels of oil per day (“Bbls/d”) compared to 33,529 Bbls/d in the prior year period. Total equivalent production during the quarter averaged 92,003 barrels of oil equivalent per day (“Boe/d”) compared to 65,121 Boe/d in the prior year period.

Post-completion of the merger, Permian Resources maintains a strong financial position and low leverage profile. During the quarter, the Company closed an amended five-year revolving credit facility with elected commitments of $1.5 billion, which is supported by a $2.5 billion borrowing base. At September 30, 2022, the Company had approximately $45.5 million in cash on hand and $550.0 million of borrowings outstanding under its revolving credit facility.

Operational Results

Permian Resources has continued to optimize its Delaware Basin acreage position with large-scale, co-development well packages to ensure the most efficient development of its asset base. During the quarter, the pro forma Company operated an eight-rig drilling program to spud and complete 36 and 38 wells, respectively. Total capital expenditures (“capex”) incurred for the quarter were $198.9 million.

“Our field personnel have done an excellent job navigating the challenging oilfield service environment, and we have experienced no material operational delays due to logistical or supply chain constraints,” said Hickey. “Going forward, we will continue to focus on driving further efficiencies, extending lateral lengths and developing larger well packages to help partially offset future oilfield service cost inflation.”

Shareholder Returns

Permian Resources announced today that its Board of Directors declared a quarterly cash dividend of $0.05 per share of Class A common stock, or $0.20 per share on an annualized basis. The dividend is payable on November 29, 2022 to shareholders of record as of November 21, 2022. The Company’s base dividend represents an annualized yield of 1.8%, as of November 7, 2022.

In addition to its base dividend, Permian Resources previously announced its variable return framework in conjunction with the merger closing. The Company’s variable return program is structured to distribute at least 50% of free cash flow after the base dividend through a variable dividend, share repurchases or a combination of both.

“Having emphasized our commitment to shareholder returns, we’re pleased to announce our inaugural dividend just two months after closing the merger,” said Walter. “Our base dividend and variable return program are supported by our strong balance sheet and high-quality asset base, with an inventory life that can sustain these returns for years to come.”

Operational Synergies Update

Through the implementation of best practices, the Company has witnessed an immediate improvement in drilling cycle times on its New Mexico acreage. The Company recently achieved spud-to-TD in the Second and Third Bone Spring Sands intervals in Eddy County in eight and twelve days, respectively, representing a material reduction to previous results. The Company is also focused on high-grading its drilling fleet and the application of future design modifications, which are expected to drive additional operational efficiencies.

The Company has expanded its water recycling program to legacy Colgate acreage in Texas, advancing sustainability initiatives and delivering capex and LOE savings. Lastly, both legacy companies extended their existing electrical substation grids to offset assets, in an effort to utilize the lowest cost electricity supply for the Company going forward.

“We’re already starting to realize the benefits of our enhanced size and scale, having recently optimized pricing across both our completion and production operations to further reduce costs,” said Hickey. “Additionally, our drilling team has performed exceptionally well, nearly achieving two Company records directly out of the gate on our Parkway asset in Eddy County.”

Natural Gas Marketing Update

In September, Permian Resources entered into a revised contract with one of its primary midstream providers to sell a significant amount of its residue natural gas at Houston Ship Channel pricing, thereby reducing exposure to regional prices and providing additional flow assurance. For the entirety of its natural gas production, the Company is confident in its ability to transport gas out of the Permian Basin as a result of its access to firm transportation via contractual arrangements with its large integrated midstream providers.

The Company has further mitigated its exposure to Waha pricing through the use of basis hedges. For 2023, Permian Resources has Waha basis differential swaps in place for 67,500 MMBtu/d of natural gas at a weighted average price of ($1.25) per MMBtu.

“We have been proactive in our natural gas marketing and hedging efforts and, as a result, expect a significant portion of our natural gas to receive Gulf Coast prices next year,” said Walter. “Specifically, we estimate that approximately one third of our natural gas production in 2023 will be exposed to Waha pricing, with the remainder being exposed to Houston Ship Channel pricing and protected by basis hedges.”

Quarterly Report on Form 10-Q

Permian Resources’ financial statements and related footnotes will be available in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, which is expected to be filed with the SEC on November 9, 2022.

Conference Call and Webcast

Permian Resources will host an investor conference call on Wednesday, November 9, 2022 at 9:00 a.m. Central (10:00 a.m. Eastern) to discuss third quarter operating and financial results. Interested parties may join the webcast by visiting Permian Resources’ website at www.permianres.com and clicking on the webcast link or by dialing (833) 634-2524, or (412) 902-4178 for international calls, and referencing “Permian Resources” at least 15 minutes prior to the start of the call. A replay of the call will be available on the Company’s website or by phone at (877) 344-7529 (Access Code: 5341497) for a seven-day period following the call.

About Permian Resources

Headquartered in Midland, Texas, Permian Resources is an independent oil and natural gas company focused on the responsible acquisition, optimization and development of high-return oil and natural gas properties. The Company’s assets and operations are located in the core of the Delaware Basin. For more information, please visit www.permianres.com. 

Cautionary Note Regarding Forward-Looking Statements

The information in this press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact included in this press release, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this press release, the words “could,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “goal,” “plan,” “target” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.

Forward-looking statements may include statements about:

• volatility of oil, natural gas and NGL prices or a prolonged period of low oil, natural gas or NGL prices and the effects of actions by, or disputes among or between, members of the Organization of Petroleum Exporting Countries (“OPEC”), such as Saudi Arabia, and other oil and natural gas producing countries, such as Russia, with respect to production levels or other matters related to the price of oil;
• the effects of excess supply of oil and natural gas resulting from reduced demand caused by the COVID-19 pandemic and the actions taken in response by certain oil and natural gas producing countries;
• political and economic conditions in or affecting other producing regions or countries, including the Middle East, Russia, Eastern Europe, Africa and South America;
• our ability to realize the anticipated benefits and synergies from the recently-closed merger and effectively integrate the assets of Centennial and Colgate;
• our business strategy and future drilling plans;
• our reserves and our ability to replace the reserves we produce through drilling and property acquisitions;
• our drilling prospects, inventories, projects and programs;
• our financial strategy, return of capital program, liquidity and capital required for our development program;
• our realized oil, natural gas and NGL prices;
• the timing and amount of our future production of oil, natural gas and NGLs;
• our ability to identify, complete and effectively integrate acquisitions of properties or businesses;
• our hedging strategy and results;
• our competition and government regulations;
• our ability to obtain permits and governmental approvals;
• our pending legal or environmental matters;
• the marketing and transportation of our oil, natural gas and NGLs;
• our leasehold or business acquisitions;
• costs of developing or operating our properties;
• our anticipated rate of return;
• general economic conditions;
• weather conditions in the areas where we operate;
• credit markets;
• uncertainty regarding our future operating results;
• our plans, objectives, expectations and intentions contained in this press release that are not historical; and
• the other factors described in our most recent Annual Report on Form 10-K, and any updates to those factors set forth in our subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.
  

We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the development, production, gathering and sale of oil and natural gas. These risks include, but are not limited to, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, risks relating to the merger, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating oil and gas reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures and the other risks described in our filings with the SEC.

Reserve engineering is a process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way. The accuracy of any oil and gas reserve estimate depends on the quality of available data, the interpretation of such data, and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil and natural gas that are ultimately recovered.

Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements, expressed or implied, included in this press release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this press release.

1) Adjusted Free Cash Flow is a non-GAAP financial measure. See “Non-GAAP Financial Measures” included within the Appendix of this press release for related disclosures and reconciliations to the most directly comparable financial measures calculated and presented in accordance with GAAP.

Contact:
Hays Mabry
Sr. Director, Investor Relations
(832) 240-3265
ir@permianres.com 

Permian Resources Corporation
Operating Highlights

	Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
Net revenues (in thousands):
Oil sales	$	397,187			$	201,447			$	1,009,545			$	512,278
Natural gas sales		93,455				43,800				200,503				106,266
NGL sales		59,136				43,258				159,661				94,929
Oil and gas sales	$	549,778			$	288,505			$	1,369,709			$	713,473
Average sales prices:
Oil (per Bbl)	$	89.02			$	65.31			$	93.93			$	60.05
Effect of derivative settlements on average price (per Bbl)		(2.71	)			(8.37	)			(9.91	)			(10.12	)
Oil net of hedging (per Bbl)	$	86.31			$	56.94			$	84.02			$	49.93
Average NYMEX price for oil (per Bbl)	$	91.56			$	70.56			$	98.10			$	64.82
Oil differential from NYMEX		(2.54	)			(5.25	)			(4.17	)			(4.77	)
Natural gas (per Mcf)	$	6.57			$	3.99			$	5.72			$	3.44
Effect of derivative settlements on average price (per Mcf)		(1.41	)			(0.27	)			(1.20	)			(0.09	)
Natural gas net of hedging (per Mcf)	$	5.16			$	3.72			$	4.52			$	3.35
Average NYMEX price for natural gas (per Mcf)	$	7.96			$	4.28			$	6.65			$	3.53
Natural gas differential from NYMEX		(1.39	)			(0.29	)			(0.93	)			(0.09	)
NGL (per Bbl)	$	36.21			$	40.16			$	42.20			$	33.98
Net production:
Oil (MBbls)		4,462				3,085				10,748				8,531
Natural gas (MMcf)		14,216				10,977				35,082				30,933
NGL (MBbls)		1,633				1,077				3,784				2,794
Total (MBoe)(1)		8,464				5,991				20,378				16,479
Average daily net production:
Oil (Bbls/d)		48,499				33,529				39,369				31,246
Natural gas (Mcf/d)		154,520				119,311				128,504				113,305
NGL (Bbls/d)		17,751				11,707				13,859				10,233
Total (Boe/d)(1)		92,003				65,121				74,646				60,363

⁽¹⁾ Calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one Boe.

Permian Resources Corporation
Operating Expenses

	Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
Operating costs (in thousands):
Lease operating expenses	$	40,944			$	28,685			$	98,578			$	77,522
Severance and ad valorem taxes		41,745				17,800				101,491				46,167
Gathering, processing and transportation expenses		30,022				24,164				77,669				64,283
Operating cost metrics:
Lease operating expenses (per Boe)	$	4.84			$	4.79			$	4.84			$	4.70
Severance and ad valorem taxes (% of revenue)		7.6	%			6.2	%			7.4	%			6.5	%
Gathering, processing and transportation expenses (per Boe)	$	3.55			$	4.03			$	3.81			$	3.90

Permian Resources Corporation
Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)

	Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
Operating revenues
Oil and gas sales	$	549,778			$	288,505			$	1,369,709			$	713,473
Operating expenses
Lease operating expenses		40,944				28,685				98,578				77,522
Severance and ad valorem taxes		41,745				17,800				101,491				46,167
Gathering, processing and transportation expenses		30,022				24,164				77,669				64,283
Depreciation, depletion and amortization		109,500				76,047				262,626				213,259
General and administrative expenses		43,387				35,748				83,937				89,811
Merger and integration expense		59,270				—				64,955				—
Impairment and abandonment expense		498				7,712				3,631				26,111
Exploration and other expenses		2,352				1,839				6,613				4,698
Total operating expenses		327,718				191,995				699,500				521,851
Net gain (loss) on sale of long-lived assets		(3	)			(290	)			(1,327	)			(254	)
Proceeds from terminated sale of assets		—				—				—				5,983
Income (loss) from operations		222,057				96,220				668,882				197,351
Other income (expense)
Interest expense		(28,807	)			(14,690	)			(56,287	)			(47,357	)
Gain (loss) on extinguishment of debt		—				—				—				(22,156	)
Net gain (loss) on derivative instruments		181,308				(44,527	)			17,651				(150,685	)
Other income (expense)		115				121				318				271
Total other income (expense)		152,616				(59,096	)			(38,318	)			(219,927	)
Income (loss) before income taxes		374,673				37,124				630,564				(22,576	)
Income tax (expense) benefit		(31,169	)			—				(79,432	)			—
Net income (loss)		343,504				37,124				551,132				(22,576	)
Less: Net (income) loss attributable to noncontrolling interest		(119,145	)			—				(119,145	)			—
Net income (loss) attributable to Class A Common Stock	$	224,359			$	37,124			$	431,987			$	(22,576	)
Income (loss) per share of Class A Common Stock:
Basic	$	0.78			$	0.13			$	1.51			$	(0.08	)
Diluted	$	0.70			$	0.12			$	1.36			$	(0.08	)
Weighted average Class A Common Stock outstanding:
Basic		286,245				281,162				285,368				279,781
Diluted		321,986				316,209				320,595				279,781

Permian Resources Corporation
Consolidated Balance Sheets (unaudited)
(in thousands, except share and per share amounts)

	September 30, 2022				December 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	45,514			$	9,380
Accounts receivable, net		238,090				71,295
Derivative instruments		146,476				—
Prepaid and other current assets		15,684				5,860
Total current assets		445,764				86,535
Property and Equipment
Oil and natural gas properties, successful efforts method
Unproved properties		1,649,413				1,040,386
Proved properties		8,554,383				4,623,726
Accumulated depreciation, depletion and amortization		(2,238,906	)			(1,989,489	)
Total oil and natural gas properties, net		7,964,890				3,674,623
Other property and equipment, net		14,837				11,197
Total property and equipment, net		7,979,727				3,685,820
Noncurrent assets
Operating lease right-of-use assets		72,244				16,385
Other noncurrent assets		111,897				15,854
TOTAL ASSETS	$	8,609,632			$	3,804,594
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued expenses	$	560,583			$	130,256
Operating lease liabilities		30,140				1,413
Derivative instruments		12,118				35,150
Other current liabilities		12,925				1,080
Total current liabilities		615,766				167,899
Noncurrent liabilities
Long-term debt, net		2,303,670				825,565
Asset retirement obligations		40,142				17,240
Deferred income taxes		80,696				2,589
Operating lease liabilities		48,475				16,002
Other noncurrent liabilities		357				24,579
Total liabilities		3,089,106				1,053,874
Shareholders’ equity
Common stock, $0.0001 par value, 1,500,000,000 shares authorized:
Class A: 298,196,091 shares issued and 288,482,677 shares outstanding at September 30, 2022 and 294,260,623 shares issued and 284,696,972 shares outstanding at December 31, 2021		30				29
Class C (Convertible): 269,300,000 shares issued and outstanding at September 30, 2022 and no shares issued or outstanding at December 31, 2021		27				—
Additional paid-in capital		2,654,774				3,013,017
Retained earnings (accumulated deficit)		169,661				(262,326	)
Total shareholders' equity		2,824,492				2,750,720
Noncontrolling interest		2,696,034				—
Total equity		5,520,526				2,750,720
TOTAL LIABILITIES AND EQUITY	$	8,609,632			$	3,804,594

Permian Resources Corporation
Consolidated Statements of Cash Flows (unaudited)
(in thousands)

	Nine Months Ended September 30,
		2022				2021
Cash flows from operating activities:
Net income (loss)	$	551,132			$	(22,576	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		262,626				213,259
Stock-based compensation expense - equity awards		60,971				32,299
Stock-based compensation expense - liability awards		(24,174	)			19,950
Impairment and abandonment expense		3,631				26,111
Deferred tax expense (benefit)		78,832				—
Net (gain) loss on sale of long-lived assets		1,327				254
Non-cash portion of derivative (gain) loss		(166,372	)			61,490
Amortization of debt issuance costs and debt discount		12,555				3,935
(Gain) loss on extinguishment of debt		—				22,156
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(6,753	)			(42,998	)
(Increase) decrease in prepaid and other assets		(38	)			1,803
Increase (decrease) in accounts payable and other liabilities		69,639				17,449
Net cash provided by operating activities		843,376				333,132
Cash flows from investing activities:
Acquisition of oil and natural gas properties		(4,866	)			(4,285	)
Drilling and development capital expenditures		(397,892	)			(215,358	)
Cash paid for business acquired in the Merger, net of cash acquired		(496,671	)			—
Purchases of other property and equipment		(3,199	)			(686	)
Proceeds from sales of oil and natural gas properties		6,190				4,011
Net cash used in investing activities		(896,438	)			(216,318	)
Cash flows from financing activities:
Proceeds from borrowings under revolving credit facility		970,000				450,000
Repayment of borrowings under revolving credit facility		(445,000	)			(575,000	)
Repayment of credit facility acquired in the Merger		(400,000	)			—
Proceeds from issuance of senior notes		—				170,000
Debt issuance costs		(19,611	)			(6,421	)
Premiums paid on capped call transactions		—				(14,688	)
Redemption of senior secured notes		—				(127,073	)
Proceeds from exercise of stock options		46				15
Class A Common Stock repurchased from employees for taxes due upon share vestings		(16,241	)			(14,459	)
Net cash provided by (used in) financing activities		89,194				(117,626	)
Net increase (decrease) in cash, cash equivalents and restricted cash		36,132				(812	)
Cash, cash equivalents and restricted cash, beginning of period		9,935				8,339
Cash, cash equivalents and restricted cash, end of period	$	46,067			$	7,527

Reconciliation of cash, cash equivalents and restricted cash presented on the Consolidated Statements of Cash Flows for the periods presented:

	Nine Months Ended September 30,
		2022			2021
Cash and cash equivalents	$	45,514		$	4,985
Restricted cash		553			2,542
Total cash, cash equivalents and restricted cash	$	46,067		$	7,527

Non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), our earnings release contains non-GAAP financial measures as described below.

Adjusted EBITDAX

Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. We define Adjusted EBITDAX as net income attributable to Class A Common Stock before net income/loss attributable to noncontrolling interest, interest expense, income taxes, depreciation, depletion and amortization, impairment and abandonment expense, non-cash gains or losses on derivatives, stock-based compensation (not cash-settled), exploration and other expenses, merger and integration expense, gain/loss from the sale of long-lived assets and non-recurring items. Adjusted EBITDAX is not a measure of net income as determined by GAAP.

Our management believes Adjusted EBITDAX is useful as it allows them to more effectively evaluate our operating performance and compare the results of our operations from period to period and against our peers, without regard to our financing methods or capital structure. We exclude the items listed above from net income in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX. Our presentation of Adjusted EBITDAX should not be construed as an inference that our results will be unaffected by unusual or nonrecurring items. Our computations of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies.

The following table presents a reconciliation of Adjusted EBITDAX to net income, which is the most directly comparable financial measure calculated and presented in accordance with GAAP:

	Three Months Ended
(in thousands)	9/30/2022				6/30/2022				3/31/2022				12/31/2021				9/30/2021
Adjusted EBITDAX reconciliation to net income:
Net income (loss) attributable to Class A Common Stock	$	224,359			$	191,826			$	15,802			$	160,751			$	37,124
Net income (loss) attributable to noncontrolling interest		119,145				—				—				—				—
Interest expense		28,807				14,326				13,154				13,931				14,690
Income tax expense		31,169				41,487				6,776				569				—
Depreciation, depletion and amortization		109,500				82,117				71,009				75,863				76,047
Impairment and abandonment expense		498				506				2,627				6,400				7,712
Non-cash derivative (gain) loss		(213,503	)			(39,514	)			86,645				(44,790	)			15,731
Stock-based compensation expense(1)		18,896				(2,487	)			18,834				5,594				17,421
Exploration and other expenses		2,352				1,954				2,307				3,185				1,839
Merger and integration expense		59,270				5,685				—				—				—
(Gain) loss on sale of long-lived assets		3				1,406				(82	)			(34,422	)			290
Adjusted EBITDAX	$	380,496			$	297,306			$	217,072			$	187,081			$	170,854

⁽¹⁾ Includes stock-based compensation for equity awards and also for cash-based liability awards that have not yet been settled in cash, both of which relate to general and administrative employees only. Stock-based compensation amounts for geographical and geophysical personnel are included within the Exploration and other expenses line item.

Free Cash Flow and Adjusted Free Cash Flow

Free cash flow and adjusted free cash flow are supplemental non-GAAP financial measures that are used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. We define free cash flow as net cash provided by operating activities before changes in working capital, less incurred capital expenditures and adjusted free cash flow as free cash flow before non-recurring merger and integration expense.

Our management believes free cash flow and adjusted free cash flow are useful indicators of the Company’s ability to internally fund its exploration and development activities and to service or incur additional debt, without regard to the timing of settlement of either operating assets and liabilities or accounts payable related to capital expenditures. The Company believes that these measures, as so adjusted, present meaningful indicators of the Company’s actual sources and uses of capital associated with its operations conducted during the applicable period. Our computations of free cash flow and adjusted free cash flow may not be comparable to other similarly titled measures of other companies. Free cash flow and adjusted free cash flow should not be considered as alternatives to, or more meaningful than, net cash provided by operating activities as determined in accordance with GAAP or as indicators of our operating performance or liquidity.

Free cash flow and adjusted free cash flow are not financial measures that are determined in accordance with GAAP. Accordingly, the following table presents a reconciliation of free cash flow and adjusted free cash flow to net cash provided by operating activities, which is the most directly comparable financial measure calculated and presented in accordance with GAAP:

	Three Months Ended September 30,
(in thousands)		2022				2021
Net cash provided by operating activities	$	388,277			$	153,507
Changes in working capital:
Accounts receivable		(55,998	)			9,515
Prepaid and other assets		(6,163	)			(1,812	)
Accounts payable and other liabilities		(27,148	)			(5,148	)
Operating cash flow before working capital changes		298,968				156,062
Less: total capital expenditures incurred		(198,900	)			(78,900	)
Free cash flow		100,068				77,162
Merger and integration expense		59,270				—
Adjusted free cash flow	$	159,338			$	77,162

The following table summarizes the approximate volumes and average contract prices of the hedge contracts the Company had in place as of October 31, 2022. There were no additional contracts entered into through the date of this filing:

	Period		Volume (Bbls)		Volume (Bbls/d)		Wtd. Avg. Crude Price ($/Bbl)(1)
Crude oil swaps	October 2022 - December 2022		2,530,000		27,500		$89.17
	January 2023 - March 2023		1,575,000		17,500		90.58
	April 2023 - June 2023		1,592,500		17,500		87.64
	July 2023 - September 2023		1,472,000		16,000		86.36
	October 2023 - December 2023		1,472,000		16,000		84.11
	January 2024 - March 2024		1,092,000		12,000		78.46
	April 2024 - June 2024		1,092,000		12,000		77.30
	July 2024 - September 2024		1,104,000		12,000		76.21
	October 2024 - December 2024		1,104,000		12,000		75.27
	Period		Volume (Bbls)		Volume (Bbls/d)		Wtd. Avg. Collar Price Ranges ($/Bbl)(2)
Crude oil collars	October 2022 - December 2022		644,000		7,000		$80.00 - $104.17
	January 2023 - March 2023		810,000		9,000		75.56 - 91.15
	April 2023 - June 2023		819,000		9,000		75.56 - 91.15
	July 2023 - September 2023		644,000		7,000		76.43 - 92.70
	October 2023 - December 2023		644,000		7,000		76.43 - 92.70
	Period		Volume (Bbls)		Volume (Bbls/d)		Wtd. Avg. Differential ($/Bbl)(3)
Crude oil basis differential swaps	October 2022 - December 2022		1,848,886		20,097		$0.62
	January 2023 - March 2023		729,999		8,111		0.55
	April 2023 - June 2023		739,499		8,126		0.55
	July 2023 - September 2023		749,000		8,141		0.52
	October 2023 - December 2023		749,002		8,141		0.52
	January 2024 - March 2024		637,000		7,000		0.43
	April 2024 - June 2024		637,000		7,000		0.43
	July 2024 - September 2024		644,000		7,000		0.43
	October 2024 - December 2024		644,000		7,000		0.43
	Period		Volume (Bbls)		Volume (Bbls/d)		Wtd. Avg. Differential ($/Bbl)(4)
Crude oil roll differential swaps	October 2022 - December 2022		2,760,000		30,000		$1.85
	January 2023 - March 2023		1,350,000		15,000		1.34
	April 2023 - June 2023		1,365,000		15,000		1.25
	July 2023 - September 2023		1,380,000		15,000		1.23
	October 2023 - December 2023		1,380,000		15,000		1.22
	January 2024 - March 2024		637,000		7,000		0.75
	April 2024 - June 2024		637,000		7,000		0.74
	July 2024 - September 2024		644,000		7,000		0.73
	October 2024 - December 2024		644,000		7,000		0.72

⁽¹⁾ These crude oil swap transactions are settled based on the NYMEX WTI index price on each trading day within the specified monthly settlement period versus the contractual swap price for the volumes stipulated.

⁽²⁾ These crude oil collars are settled based on the NYMEX WTI index price on each trading day within the specified monthly settlement period versus the contractual floor and ceiling prices for the volumes stipulated.

⁽³⁾ These crude oil basis swap transactions are settled based on the difference between the arithmetic average of ARGUS MIDLAND WTI and ARGUS WTI CUSHING indices, during each applicable monthly settlement period.

⁽⁴⁾ These crude oil roll swap transactions are settled based on the difference between the arithmetic average of NYMEX WTI calendar month prices and the physical crude oil delivery month price.

	Period		Volume (MMBtu)		Volume (MMBtu/d)		Wtd. Avg. Gas Price ($/MMBtu)(1)
Natural gas swaps	October 2022 - December 2022		3,432,715		37,312		$5.86
	January 2023 - March 2023		1,670,157		18,557		7.64
	April 2023 - June 2023		1,572,752		17,283		4.70
	July 2023 - September 2023		1,486,925		16,162		4.70
	October 2023 - December 2023		1,413,628		15,366		4.90
	January 2024 - March 2024		464,919		5,109		5.01
	April 2024 - June 2024		446,321		4,905		3.93
	July 2024 - September 2024		429,388		4,667		4.01
	October 2024 - December 2024		413,899		4,499		4.32
	Period		Volume (MMBtu)		Volume (MMBtu/d)		Wtd. Avg. Differential ($/MMBtu)(2)
Natural gas basis differential swaps	October 2022 - December 2022		6,900,000		75,000		$(0.72)
	January 2023 - March 2023		6,075,000		67,500		(1.10)
	April 2023 - June 2023		6,142,500		67,500		(1.30)
	July 2023 - September 2023		6,210,000		67,500		(1.30)
	October 2023 - December 2023		6,210,000		67,500		(1.30)
	January 2024 - March 2024		1,820,000		20,000		(0.59)
	April 2024 - June 2024		1,820,000		20,000		(0.67)
	July 2024 - September 2024		1,840,000		20,000		(0.66)
	October 2024 - December 2024		1,840,000		20,000		(0.64)
	Period		Volume (MMBtu)		Volume (MMBtu/d)		Wtd. Avg. Collar Price Ranges ($/MMBtu)(3)
Natural gas collars	October 2022 - December 2022		5,617,285		61,057		$5.64 - $9.11
	January 2023 - March 2023		7,104,843		78,943		4.67 - 10.33
	April 2023 - June 2023		6,389,748		70,217		3.64 - 7.62
	July 2023 - September 2023		6,563,075		71,338		3.64 - 7.52
	October 2023 - December 2023		6,636,372		72,134		3.66 - 8.22
	January 2024 - March 2024		3,175,081		34,891		3.36 - 9.44
	April 2024 - June 2024		1,373,679		15,095		3.00 - 6.45
	July 2024 - September 2024		1,410,612		15,333		3.00 - 6.52
	October 2024 - December 2024		1,426,101		15,501		3.25 - 7.30

⁽¹⁾ These natural gas swap contracts are settled based on the NYMEX Henry Hub price on each trading day within the specified monthly settlement period versus the contractual swap price for the volumes stipulated.

⁽²⁾ These natural gas basis swap contracts are settled based on the difference between the Inside FERC’s West Texas WAHA price and the NYMEX price of natural gas, during each applicable monthly settlement period.

⁽³⁾  These natural gas collars are settled based on the NYMEX Henry Hub price on each trading day within the specified monthly settlement period versus the contractual floor and ceiling prices for the volumes stipulated.