Over the past year, PrimeEnergy Resources Corporation (PNRG Quick QuotePNRG - Free Report) stock has gained 14.9%, significantly outpacing the industry’s 13.9% decline. The company outperformed other upstream energy players, including Matador Resources (MTDR Quick QuoteMTDR - Free Report) and APA Corporation (APA Quick QuoteAPA - Free Report) , which posted declines of 1.6% and 13.9%, respectively, during the same period.

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In the oilfields of Texas and Oklahoma, PrimeEnergy has been navigating a year of shifting fortunes. Once buoyed by strong oil markets, the company is now facing headwinds as crude prices fall, squeezing earnings and margins. Yet, PrimeEnergy is not standing still. Natural gas and NGL production are on the rise, cash flow remains solid, and the company is buying back shares to reward investors. The question for the market is clear: is this a moment to back PrimeEnergy’s resilience, or a time to wait out the storm?

Capitalizing on the Permian Basin’s Rich Resources

PrimeEnergy continues to focus on its core assets in Texas and Oklahoma, particularly in the prolific Permian Basin. With a strategic emphasis on horizontal drilling, the company boosts production while limiting environmental disruption. PrimeEnergy also maintains a 12.5% overriding royalty interest in 30,000 acres in West Virginia, although revenues from this position are pending development.

The company expects to significantly expand horizontal drilling activity, particularly in the Midland Basin of West Texas. For 2025, PNRG has budgeted $129 million to invest in 43 horizontal wells, up from $113 million invested in 48 horizontals in 2024 and $96 million in 35 horizontals in 2023. This reflects continued growth in capital commitment toward drilling and development.

Between the start of 2023 and the end of 2025, the company projects investing $338 million in horizontal development, primarily concentrated in West Texas.

Financial Performance in 2025

For the first half of 2025, PrimeEnergy’s revenues totaled $92 million versus $107.8 million in the prior year, and net income came in at $12.4 million versus $31.1 million. These declines reflect weaker oil prices; yet the company generated a discretionary cash flow of $56.9 million, underscoring its ability to fund operations even in a softer market.

Despite lower earnings, PrimeEnergy has continued to reward shareholders. The company repurchased 53,000 shares in 2025 alone, valued at $12.1 million, bringing the cumulative total of buybacks to $113.5 million since the program began. Liquidity also remains intact, with $115 million available under its credit facility. However, cash on hand was relatively thin at $2.4 million, leaving the company reliant on ongoing cash flow and credit access.

Market Environment: Oil vs. Natural Gas

The broader energy market outlook complicates PNRG’s earnings potential. The U.S. Energy Information Administration projects Brentcrude prices to average $58 per barrel in the fourth quarter of 2025 and fall to $50 in early 2026, pressured by oversupply from OPEC+ production increases. By contrast, natural gas prices are expected to strengthen, with Henry Hub spot prices forecast to rise to $4.30 per MMBtu in 2026, supported by higher liquefied natural gas exports and tightening supply-demand balances.

This divergence may benefit PrimeEnergy, which has been expanding its natural gas and natural gas liquid output. Chairman Charles E. Drimal, Jr. highlighted that while oil volumes fell, natural gas and NGL production grew, helping balance revenues against volatile oil prices.

Image Source: U.S. Energy Information Administration

Valuation

PNRG is currently trading at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) ratio of 1.89X compared with the industry average of 11.19X. This suggests relative undervaluation and the metric remains lower than the company’s peers, including Matador Resources (3.81X) and APA Corp. (3X), indicating an opportunity for potential investors.

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Key Risks to Weigh

Investors should study the risks carefully before committing capital. The most immediate challenge is commodity price volatility. With oil expected to remain below $55 in 2026, PNRG’s earnings may stay under pressure.

The company also faces limitations from its small scale relative to larger competitors, which have deeper resources to withstand downturns. Liquidity is another concern, as its $2.4-million cash balance leaves a narrow cushion should operating cash flows weaken. Operational risks such as drilling cost overruns, reserve replacement challenges and technical setbacks are inherent in the industry. Furthermore, regulatory and environmental pressures are growing, and new climate policies or emissions restrictions may add compliance costs or limit future drilling.

Investment Outlook

PrimeEnergy is navigating a difficult oil price environment with strong execution in drilling, a growing natural gas portfolio and ongoing shareholder returns. Its undervalued metrics make it an appealing candidate for investors seeking exposure to energy at a discount.

On the negative side, steep earnings declines, the prospect of persistently weak oil prices, and the company’s small scale present real risks. PNRG is not a defensive play but rather a speculative investment closely tied to commodity markets.

At current conditions, PNRG looks best suited as a speculative buy for risk-tolerant investors, while others may prefer to wait for signs of stronger earnings consistency and more favorable oil price trends.