Simplicity. Asymmetry. Alignment.

The FJ Research Investment Philosophy

I do not invest in everything. I only invest when three things align: simplicity, asymmetry, and alignment of incentives. I search for misunderstood companies in overlooked markets. I compare every potential investment to the few positions I already hold. If a new idea doesn’t beat what I already own, I pass. My portfolio is concentrated. My bar is high. I write so that readers can understand how I think, not just what I think.

This is my highest-conviction oil producer. If oil collapses, this is the only name I will aggressively buy. This is the oil stock I will ride into the next decade if fossil fuels prove more durable than anyone expects. This is Permian Resources (PR).

When No One Looks at Oil, I Look at Oil

Right now, everyone talks about Nvidia, AI, and semiconductors. The best-known companies in the world trade at 30x–40x forward earnings. Passive capital floods into the same 10 tickers, driven by momentum and storylines. Oil has no story right now. But if you care about risk-reward, if you care about internal diversification, and if you want to invest like a contrarian, this is the time to pay attention to energy again.

We all want the “Energiewende” to work. We all want a greener, sustainable future. But the numbers tell a different story. Global oil demand is still growing. Emerging markets are still industrializing. The infrastructure needed for a fossil-free world is decades away. That’s not a judgment. That’s reality.

In a world that wants renewables, oil is still essential. And when oil demand stays steady but prices collapse, the weakest producers die. The lowest-cost operators thrive. This report is about the lowest-cost and highest-quality operator I know.

What Is Permian Resources?

Permian Resources (NYSE: PR) is an independent oil and gas company operating exclusively in the Delaware Basin, the highest-quality part of the Permian Basin. The Permian is the most prolific oil-producing region in the United States, and arguably the most productive in the entire Western Hemisphere. Permian Resources is a pure-play. It is focused. It is efficient. And it is run by two of the sharpest young CEOs in the business.

The company was formed in 2022 through the merger of Colgate Energy and Centennial Resource Development. This was not a roll-up. This was a carefully crafted merger of equals, led by private equity investors who understood the importance of operating leverage, asset concentration, and capital discipline.

A Pure-Play on the Core of the Core

The Delaware Basin is not just a good oil field. It is the best oil field. It has the thickest pay zones, the best rock quality, and the highest production efficiency in the U.S. shale patch. Permian Resources controls 180,000 net acres in this region and produces over 300,000 barrels of oil equivalent per day (BOE/d) with some of the lowest breakeven costs in the sector.

Their acreage is not scattered. It is blocky, contiguous, and fully operated. This matters. It allows for longer laterals, better infrastructure utilization, and higher margins. When oil prices fall, acreage quality becomes the single most important factor. Permian Resources owns some of the best.

The Lowest-Cost Producer Is King

Permian Resources runs a lean operation with industry-leading margins. Their free cash flow breakeven sits near $40 per barrel WTI, while many competitors need $55 or higher to break even. That gives them immense flexibility in volatile markets.

In Q1 2025, despite soft oil prices, they delivered strong cash flow and maintained capital discipline. The company reinvests less than 60% of operating cash flow, keeping the rest for shareholder returns and balance sheet improvements.

When WTI drops below $50, I will begin to accumulate. If it drops below $46, I will buy aggressively. Why? Because Permian Resources has the asset quality, operational efficiency, and leadership strength to survive and even grow in a downturn.

Young, Aligned, and Visionary Leadership

Permian Resources is led by James Walter and Will Hickey, two co-CEOs in their mid-30s who built Colgate Energy from the ground up. This is not your typical legacy oil team. These are operators who grew up in the shale era. They understand the importance of scale, technology, discipline, and alignment.

Both CEOs own tens of millions of dollars in equity and take modest base salaries. They are founders, not hired guns. Their approach is modern: they integrate data analytics, real-time production monitoring, and automated field management into their operations. The company runs like a technology-enabled energy firm, not a bloated old major.

They are not chasing growth. They are optimizing for per-share value creation. This is rare in oil and gas, where the temptation to drill aggressively in good times often destroys long-term returns. Walter and Hickey are playing the long game.

Balance Sheet Strength and Capital Discipline

Permian Resources has cleaned up its balance sheet post-merger. As of Q1 2025, it holds approximately $400 million in net debt, with a leverage ratio below 1.0x. This gives it flexibility to continue investing through cycles without taking dilution or risking solvency.

The company’s free cash flow yield sits around 12%, even at $70 WTI. At lower prices, that yield compresses, but the business still generates cash. This is the definition of margin of safety. Many other producers cannot survive under $50 oil. Permian Resources can.

Shareholder Returns and Dividend Policy

Permian Resources pays a base-plus-variable dividend, returning 50% of free cash flow to shareholders each quarter. This includes a modest base dividend and a variable top-up based on cash generation. The model is efficient and shareholder-friendly. They also buy back shares opportunistically, adding another layer of capital return.

This flexible model rewards investors without overcommitting. If prices fall, they reduce payouts but maintain operational stability. If prices rise, they reward owners. It’s a modern oil model that balances resilience with upside.

Institutional Backing and Board Strength

Permian Resources was born out of EnCap Investments, one of the most successful private equity firms in energy. EnCap still holds a large stake and has board representation. Other major shareholders include BlackRock, Vanguard, and Fidelity, along with insiders who continue to buy shares in the open market.

The board includes seasoned industry veterans and financial minds who understand capital allocation. It is not a political board. It is built for execution.

How It Compares to Occidental Petroleum

Warren Buffett owns a massive stake in Occidental Petroleum (OXY). It is his bet on the long-term durability of oil and gas. But OXY is a very different beast. It carries legacy assets, global operations, and a massive balance sheet.

Permian Resources is the opposite of OXY. It is clean, focused, nimble, and led by a new generation. It does not carry legacy liabilities or bloated corporate overhead. It is not exposed to risky offshore projects or geopolitical instability.

If you believe in oil’s long-term future and want the modern version of Buffett’s bet, Permian Resources is the high-conviction, low-cost alternative.

Global Oil Demand: Reality vs. Hope

Despite decades of climate promises, global oil demand continues to rise. The IEA now forecasts demand to stay flat or increase into the early 2030s. EV adoption is real, but not fast enough. Global aviation, shipping, petrochemicals, and industrial use cases remain heavily oil-dependent.

We hoped for a clean energy transition. But the Energiewende has run into the brick wall of physics, politics, and infrastructure. Wind and solar are intermittent. Storage is expensive. Grid upgrades are slow. Fossil fuels remain the base layer of global industrial society.

This doesn’t mean we give up on renewables. It means we need to invest with clarity, not emotion. And clarity today means understanding that oil will still matter for at least another decade. Possibly two.

Asymmetry: When Everyone Looks Away

The best time to invest in oil is not when it’s on the front page. It’s when it’s ignored. That’s today. Permian Resources trades at single-digit cash flow multiples. Tech trades at 30x revenue. The asymmetry is obvious.

When WTI hits $40–45, dozens of producers will shut down. Balance sheets will break. Private operators will disappear. The majors will tighten budgets. But Permian Resources will keep drilling, keep generating cash, and likely emerge stronger on the other side.

In a wipeout scenario, they could even become an acquisition target for Exxon, Chevron, or a global major looking to reload on high-quality U.S. shale acreage. But the longer they stay independent, the more valuable they become. Every quarter they high-grade their asset base, improve per-well economics, and compound intrinsic value.

Final Word

Permian Resources is not a trade. It is a structural bet on capital discipline, operational excellence, and the longevity of fossil fuel demand. It is my favorite oil producer. Not because it’s big. Not because it’s popular. But because it’s durable, aligned, focused, and misunderstood.

If oil goes lower, I will buy.

If oil stays low, they will survive.

If oil rebounds, they will thrive.

This is the kind of company I want in my portfolio when no one else is looking.