Investing.com -- Moody’s Ratings has boosted the Corporate Family Rating (CFR) of Permian Resources Operating, LLC from Ba2 to Ba1, citing the company’s consistent performance at its current scale following significant growth through major acquisitions. The Probability of Default Rating (PDR) was also upgraded from Ba2-PD to Ba1-PD, while the rating on its backed senior unsecured notes was raised from Ba3 to Ba2. The Speculative Grade Liquidity Rating (SGL) remains at SGL-1, and the rating outlook has been shifted from positive to stable.
Thomas Le Guay, a Vice President at Moody’s Ratings, noted that Permian Resources’ prudent financial policies have positioned it to generate free cash flow and reduce debt, even amidst lower oil price conditions.
The Ba1 CFR reflects Permian Resources’ large-scale production, primarily in the Delaware basin, and its commitment to sound financial policies and free cash flow generation. The company aims to maintain net leverage between 0.5x and 1.0x, as demonstrated by the 0.95x net leverage as of December 31, 2024. In November 2024, Permian Resources switched from a variable distribution policy to a lower fixed dividend to retain more cash flow for potential acquisitions or debt repayment.
This change is expected to allow Permian Resources to improve its leverage metrics, with Retained Cash Flow (RCF) to debt trending towards 60% in 2025 and Debt/Production decreasing towards $11,000/boe, under the current $55 WTI base case oil price assumption.
The stable outlook is based on the expectation that Permian Resources will maintain financial discipline in the current volatile oil price environment, achieving free cash flow and reducing debt under current price assumptions and reducing its capital spending if oil prices decline further to avoid negative free cash flow.
Permian Resources has a strong liquidity position, reflected in its SGL-1 Speculative Grade Liquidity Rating. This position is supported by its free cash flow generation and a $2.5 billion committed senior secured revolving credit facility, maturing in February 2028, which was undrawn as of December 31, 2024. The company’s next debt maturity is $289 million, due in January 2026, which is expected to be repaid with cash. The company repaid $175 million of notes in the first quarter of 2025 using proceeds from asset disposals.
Permian Resources’ senior unsecured notes are rated Ba2, one notch below the Ba1 CFR, reflecting the effective subordination of the unsecured notes to the significant size of the $2.5 billion senior secured revolving credit facility.
Permian Resources could see a further upgrade if the company continues to show organic production growth and reserves replacement at more competitive costs and returns on investment, and significantly reduces gross debt outstanding. Conversely, a downgrade could occur if there is a substantial increase in leverage to fund acquisitions or shareholder returns or if the company experiences a meaningful decline in production.
Permian Resources Operating, LLC is an independent oil and gas exploration and production company operating across West Texas and New Mexico. The company owns around 450,000 net acres with production averaging 344 Mboe/d in 2024. The company had around 6 years of proved developed reserves as of December 31, 2024. Permian Resources’ parent company, Permian Resources Corporation, is publicly listed.
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