PRIMEENERGY RESOURCES CORP (PNRG) stock intrinsic value fair value estimate & owner earnings analysis

PrimeEnergy Resources is a small Houston-based oil and gas producer. Most of its value now sits in horizontal wells in the Permian Basin of West Texas (Reagan, Upton, Midland and Martin counties), drilled with operators such as Double Eagle, Civitas, Apache and Vital Energy, plus a smaller group of wells in Oklahoma. It also runs a small field-service business (workover rigs, water hauling and disposal), which shrank after Eastern Oil Well Service Company was sold in August 2024. In 2025 the company produced about 5.6 million barrels of oil equivalent. Oil was 2.29 million barrels of that, down 10.6% from 2024, while gas and natural gas liquids rose. The company pays no stock-based compensation and has no borrowings. How we measured earnings. Shale wells deplete quickly. Year-end 2025 proved reserves were 28.4 million barrels equivalent, or about five years of current production, and developed reserves cover about four years. So the company must keep drilling just to stay level. We therefore subtract essentially all drilling spending as an ongoing cost, except in years when revenue rose, when part of it is treated as growth. On that basis, cash earnings before interest swung widely: losses in 2016, 2017 and 2023 (heavy drilling years), about $58 million in 2024 and $30 million in 2025. Some of the swing is timing: $32 million paid in 2022 for wells booked in 2023 moved cash between those two years. We anchor on the ten-year median of about $20.5 million a year. That is roughly $8.70 per share on 2.35 million fully diluted shares, which include 767,500 never-expiring options held by insiders with exercise prices of $1.00 to $1.25. The window spans the 2016 and 2020 price collapses, the 2022 peak and the 2023-25 horizontal drilling program, so it covers a full commodity cycle. The 2025 figure fell about 46% from 2024 because realized oil prices dropped 16.5% and because 2024 was flattered by spending counted as growth. Our first-year assumption sits 32% below 2025 rather than continuing that fall, because first-half 2026 operating cash flow ($31.5 million versus $29.9 million a year earlier) shows no further slide. Base case ($92.50): the company keeps reinvesting, as it has for decades, and holds about $20.5 million a year for ten years. We credit no growth: higher oil prices, more production and new acreage are not in hand. After year ten, earnings fade to zero over another ten years. Today's booked inventory of 37 undeveloped locations plus the 24 Martin and Upton County wells now being drilled ($34.1 million, first production expected in the fourth quarter of 2026) does not show drilling room much past the early 2030s. The business is worth about $193 million and owes nothing. Adding about $25 million of cash beyond operating needs (June 30, 2026 cash of $28.7 million, less $5 million working cash, plus option proceeds) gives $217 million, or $92.50 per share. Bear case ($42.45): cash generation runs at about $9 million a year. That is in line with the 2023-25 average of about $11 million a year on our measure, with weaker oil prices and an output mix drifting toward gas and liquids. Oil volumes fell in 2025 despite $76 million of drilling, net natural gas revenue was reported as negative $10.2 million in the first half of 2026, and lenders cut the borrowing base from $115 million to $105 million on August 3, 2026. Earnings fade to zero over five years after year ten. The business is worth about $75 million, owes nothing, plus excess cash gives $100 million, or $42.45 per share. Bull case ($130.53): the company sustains the roughly $30 million a year it actually earned in 2025, at $63 realized oil, for ten years, then fades over ten. This is credited because 2025 drilling replaced about 134% of production at mid-cycle prices, and it was achieved under today's conditions. The business is worth about $282 million, owes nothing, plus excess cash gives $307 million, or $130.53 per share. Cross-check: if the company stopped drilling entirely, its developed reserves at the SEC's $65.34 oil price would be worth roughly $150 million after overhead and tax at our 6% rate, or about $75 per share including cash. That sits between our bear and base cases, which supports the range. Hedges on 367,000 barrels at $74.84 provide some near-term support. The revolving credit facility matures in December 2028 and is undrawn. Changes since our last analysis: we now count the 767,500 options, which have almost no exercise cost and never expire, as shares. That spreads value over about 48% more shares. We also apply a single 6% discount rate and charge risk through the cases. Together these raise the bear case from $29 to $42 and the base case from $82 to $92.50, and lower the bull case from $163 to $131. What would make this wrong: a sustained oil price well below the mid-$60s, drilling returns falling further as the mix shifts to gas, or acreage running out sooner than the current inventory suggests. On the other side, a new multi-year drilling inventory on existing tracts would extend the earnings stream beyond our fade. We could not determine from the filings available why first-half 2026 gas revenue was negative.