Permian Resources Up 17% in 3 Months: Should You Buy or Hold?

Permian Resources Corporation PR is a prominent player in the oil and gas industry, particularly in the Permian Basin, one of the largest and most productive oil fields in the world. The company focuses on the exploration, development and production of oil and natural gas resources. Significant presence in this key region has allowed PR to leverage the area's vast potential, driving growth and establishing it as an influential force within the energy sector. With a focus on operational efficiency and resource management, PR has been able to generate strong financial results, making it a reliable player in the ever-evolving energy market.

In the past three months, Midland, TX-based oil and gas exploration and production company has significantly outperformed both the broader oil and energy sector and the U.S. Oil & Gas Exploration & Production sub-industry (ZSI136M). PR's share price growth stands at 16.8%, marking a clear leadership in performance compared with the 0.8% gain of the U.S. Oil & Gas Exploration & Production sub-industry. In contrast, the broader oil and energy sector showed more modest growth of 7.8%. Over this period, PR demonstrated a notable upward trajectory, especially when compared with the market's more muted results.     

3-Month Performance Snapshot

As the stock gains attention for strong performance, many investors are keen to understand the factors driving the company’s performance and assess whether it's a good time to invest. Let’s dive deeper into the key drivers behind the stock’s movement and consider any potential risks.  

Trends Pointing to Greater Potential for PR’s Share

Peer-Leading Cost Structure and Operational Efficiency: The company has demonstrated a consistent ability to reduce costs, with third-quarter 2025 drilling & completion (“D&C”) costs falling to approximately $725 per lateral foot, an 11% reduction from 2024. This cost leadership, driven by operational efficiencies and vendor optimization, enhances capital efficiency and margins even in a lower commodity price situation, providing a sustainable competitive advantage in the Delaware Basin.

Strong and Growing Free Cash Flow Generation: PR reported record adjusted free cash flow of $469 million for third-quarter 2025, driven by production outperformance and cost control. This robust cash generation provides the financial flexibility to fund the "all of the above" capital allocation strategy, including dividends, buybacks, accretive acquisitions and debt reduction, directly benefiting shareholders.

Fortress Balance Sheet With Path to Investment Grade: PR significantly strengthened its balance sheet, reducing total debt by $460 million in the third quarter and achieving a low leverage ratio of 0.8x. The company received an investment-grade rating from Fitch and a positive outlook from Moody's, which lowers the cost of capital and provides resilience through cycles.

Proven and Disciplined Accretive Acquisition Strategy: PR’s management team has a decade-long track record of executing value-driven acquisitions, adding 5,500 net leasehold acres in third-quarter 2025 alone. Their on-the-ground presence in Midland and low-cost structure provide a unique advantage in sourcing and integrating bolt-on deals that immediately compete for capital, extending high-return inventory life.

Fundamental Uncertainties Impacting Forecasting

Industry-Wide Cost Inflation and Service Availability Risks: While costs are currently declining, the press release notes risks from a lack of available drilling equipment, services and transportation capacity. A future rebound in industry activity could reverse recent service cost deflation, pressuring the company's industry-leading cost structure and capital efficiency.

Execution Risks Associated With Acquisitions and Integration: PR's strategy relies heavily on accretive acquisitions. The company acknowledges the risk of failing to successfully integrate acquired assets on the anticipated terms or timeline, which could dilute value, disrupt operations and prevent the realization of expected synergies and returns.

Inherent Uncertainties in Reserve Estimates and Production Declines: The company cautions that reserve engineering is an estimation process dependent on data quality and price assumptions. Revisions can significantly change development schedules, and no guarantee that estimated quantities will be recovered. All Exploration & Production firms face inherent decline curves requiring continuous capital reinvestment. 

Exposure to Commodity Price Volatility and Macro Headwinds: Despite hedging and marketing improvements, PR’s financial performance remains heavily tied to oil and natural gas prices. The company cautions numerous forward-looking risks, including prolonged low prices, OPEC actions, geopolitical tensions and economic downturns, which could significantly impact revenues and cash flow.

Final Verdict for PR Stock   

PR has several strong points, including a peer-leading cost structure and operational efficiency, which allows it to maintain strong margins even in a low commodity price environment. The company also boasts robust free cash flow generation, a fortress balance sheet with a path to investment-grade status and a proven strategy of accretive acquisitions that enhance long-term value.

However, there are challenges, such as industry-wide cost inflation and service availability risks, execution risks related to acquisitions, and uncertainties surrounding reserve estimates and production declines. Additionally, PR remains exposed to commodity price volatility and macroeconomic headwinds that could impact future performance. Given this mix of strengths and potential challenges, investors should wait for a more opportune entry point instead of adding this Zacks Rank #3 (Hold) stock to their portfolios.

Key Picks

Investors interested in the energy sector might look at some better-ranked stocks like Cenovus Energy CVE, Oceaneering International OII, sporting a Zacks Rank #1 (Strong Buy) each, and TechnipFMC plc FTI, carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cenovus Energy is valued at $33.97 billion. It is a Canadian integrated oil and natural gas company, focused on the exploration, production and transportation of crude oil and natural gas. Cenovus Energy operates primarily in Alberta and is known for its innovative oil sands projects and strong commitment to sustainability and environmental responsibility.

Oceaneering International is valued at $2.72 billion. The company is a global provider of engineered services and products to the offshore energy, aerospace and defense industries. Oceaneering International specializes in underwater robotics, remotely operated vehicles and subsea engineering solutions for offshore oil and gas exploration and production.

TechnipFMC is valued at $21.1 billion. FTI is a global leader in energy projects, technologies and services, specializing in subsea, onshore, offshore and surface solutions for the oil and gas industry. TechnipFMC is known for its integrated engineering, procurement, construction and installation model, which helps clients reduce project costs and accelerate delivery.

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This article originally published on Zacks Investment Research (zacks.com).

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