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Permian operator Parsley Energy $PE reported worse than expected fourth quarter earnings Thursday after the close. $PE said with recent commodity price trends it has reduced  rig and frac spread counts and intends to reduce its 2019 capital leasing and acquisition spend.


Parsley Energy Inc NYSE: PE Reported Earnings after Close Thursday

$0.30 Missed Exp $0.34 EPS AND $454.9M Missed $465 Million Revenue Forecast

Earnings

Parsley Energy Inc NYSE: PE released fourth quarter earnings on Thursday with a profit of $53.8 million. On a per-share basis, the profit was 19 cents. Earnings, adjusted for non-recurring costs, were 30 cents per share. The results missed Wall Street expectations of 34 cents per share. $PE posted revenue of $454.9 million in the period missed forecasts of $465 million. The Company recorded net income attributable to its stockholders of $369.1 million, or $1.35 per share, for the year. Adjusted net income was $385.1 million, or $1.41 per share, for the year.

Consistent with the Company's commitment to capital discipline and in response to recent commodity price trends, Parsley has announced reductions in rig and frac spread counts and intends to reduce its 2019 capital leasing and acquisition spending. As a result, in 4Q18, the Company recorded non-cash leasehold impairment expense of $127.0 million relating to acreage expiring in future periods because there are no current plans to drill or extend the leases prior to their expiration in 2019. Adjusted earnings before interest, income taxes, depreciation, depletion, amortization, and exploration expense ("Adjusted EBITDAX") was $319.5 million in 4Q18 and $1,327.0 million for the year.

 

Parsley Energy Inc NYSE: PE

Market Reaction - After Hours $17.85▼ 0.08 (0.45%)

Highlights

  • Net oil production increased 5% quarter-over-quarter and 50% year-over-year to 77.0 MBo per day.
  • Total net production averaged 119.8 MBoe per day.
  • Parsley delivered strong operational results, highlighted by favorable trends in operating costs and completion efficiency, in addition to successfully drilling the Company's first three-mile lateral well. 
  • Parsley reported lease operating expense ("LOE") per Boe of $3.61 during 4Q18, a 3% reduction versus 3Q18.
  • During 4Q18, Parsley reported an average unhedged oil price realization of $54.22/Bbl net of transportation costs, representing a premium to the average Midland price(4) for the quarter.
  • Parsley's positive pricing uplift versus Midland prices during 2018 was the product of a proactive marketing strategy to diversify regional pricing exposure beginning in mid-2017.
  • Parsley's future firm transport agreements maintain favorable pricing elements by pricing a significant portion of the Company's barrels relative to Gulf Coast and international benchmarks.
  • The Company completed over 400,000 lateral feet during 4Q18, which resulted in a new Company record for completion efficiency.
  • Parsley recently drilled a three-mile lateral Wolfcamp well in its Northern Midland County area, representing one of the longest laterals ever drilled in the Permian Basin. The Company executed this technical feat in 25 days, including less than nine days spent drilling the three-mile lateral segment.

Proved reserves of 521.7 MMBoe as of December 31, 2018 represent a 25% increase versus proved reserves as of December 31, 2017. Proved developed reserves of 311.3 MMBoe as of December 31, 2018 represent a 49% increase versus proved developed reserves as of December 31, 2017.

Parsley Acerage 2019

Summary Comment and Outlook

"By any measure 2018 was a strong operational year for Parsley Energy, as we both expanded operating margins to Company-record levels and greatly enhanced our operational efficiency," said Matt Gallagher, Parsley's President and CEO. "As we turn to 2019, our top priorities are demonstrating meaningful progress toward sustainable free cash flow generation and recording a tangible year-over-year improvement in capital efficiency. Underpinning these key objectives is a deliberate shift in our de velopment approach to prioritize project-level rate of return, a strategy enabled by our deep, high-quality inventory."

Capital Expenditures

Parsley reported capital expenditures of $416 million during the fourth quarter of 2018, comprised of $362 million for drilling and completion activity and $54 million for facilities and infrastructure. The Company's 4Q18 capital expenditures decreased 6% from 3Q18 levels, reflecting Parsley's efforts to accelerate progress toward sustainable free cash flow by reducing rig and frac spread counts during the quarter.

Liquidity and Hedging

As of December 31, 2018, Parsley had approximately $1.2 billion of liquidity, consisting of $163.2 million of cash and cash equivalents and an undrawn amount of $991.3 million on the Company's revolver.(5) After recent additions to its hedge positions, a significant majority of Parsley's expected 2019 oil production is subject to hedge protection.

The Company also recently added to its 2020 hedge positions. Parsley's portfolio of option contracts protects its balance sheet and anticipated cash flow while retaining significant exposure to higher commodity prices. The Company has also entered into various basis swaps to protect against expansion of regional oil price differentials.

About Parsley Energy, Inc.

Parsley Energy, Inc. is an independent oil and natural gas company focused on the acquisition and development of unconventional oil and natural gas reserves in the Permian Basin in West Texas. For more information, visit the Company’s website at www.parsleyenergy.com.

Source: Parsley Energy

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