Permian Resources Corporation (PR): A Bear Case Theory 

We came across a bearish thesis on Permian Resources Corporation on Hunterbrook’s Substack. In this article, we will summarize the bulls’ thesis on PR. Permian Resources Corporation’s share was trading at $13.67 as of September 24th. PR’s trailing and forward P/E were 8.76 and 11.8 respectively according to Yahoo Finance.

In southeastern New Mexico’s Permian Basin, a February satellite detection revealed a methane release of more than 1,400 kilograms per hour from Permian Resources’ gas storage tanks near Carlsbad, exposing a gap in regulatory reporting and public awareness. Independent researchers at PSE Health Energy found the discharge included not only methane but a hazardous mix of benzene, ethylbenzene, hexane, toluene, and xylenes, with peak benzene concentrations exceeding 10,000 times California’s health benchmark, affecting nearly 30,000 residents across 80 square miles, including multiple schools.

Despite these risks, Permian Resources, a Texas-based independent oil and gas company led by unusually young co-CEOs, did not report the release as required under state and federal law, leaving regulators and the public largely uninformed. The company now plans to expand within Carlsbad city limits with ten new oil wells and a central tank battery, potentially impacting groundwater and air quality in nearby communities like Happy Valley. City officials and Permian Resources emphasize economic benefits, including millions in royalties, job creation, and community donations, but residents express concern over health risks, especially for children and low-income neighborhoods, and feel local government failed to adequately respond to their objections.

Regulators, including New Mexico’s Environment Department, admit they are under-resourced and lack the means to track unreported emissions, while enforcement has historically been insufficient to drive industry change. Construction on the new well pads is ongoing, with city officials and residents grappling with the tension between economic incentives and environmental and public health risks, highlighting a broader issue of accountability and transparency in oil and gas operations in the region.

Previously we covered a bullish thesis on Civitas Resources, Inc. (CIVI) by mbacandidate1 in January 2025, which highlighted the company’s debt-fueled growth, strong free cash flow, and attractive yield compared to peers. The company’s stock price has depreciated approximately by 32.85% since our coverage. The thesis still stands as CIVI retains cash flow potential. Permian Resources shares a contrarian focus on oil and gas growth but emphasizes environmental and regulatory risks in the Permian Basin.

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Disclosure: None.