Parsley Energy (PE) Q3 Results - Oct 29

[dan_s]

Highlights from last night's press release:

Generated positive free cash flow in 3Q20.

Paid 3Q20 quarterly dividend of $0.05 per share on September 18, 2020 and declared 4Q20 quarterly dividend of $0.05 per share payable on December 18, 2020 .

3Q20 net oil production decreased 1% quarter-over-quarter and increased 21% year-over-year to 111.0 MBo per day. Total 3Q20 net production averaged 183.2 MBoe per day. < Compared to my forecast of 182.0 MBoe per day and 110.0 MBOPD.

Recently announced a definitive merger agreement to be acquired by Pioneer Natural Resources Company ("Pioneer") in an all-stock transaction valued at approximately $7.6 billion , inclusive of assumed debt, expected to close in 1Q21. < After I get caught up with all the Q3 results and update all my forecast models, I will combine the PE and PXD forecasts. PE will be dropped from the Sweet 16.

Financial Update

During 3Q20, the Company recorded net income attributable to its stockholders of $22.6 million , or $0.06 per share. Excluding, on a tax-adjusted basis, certain items that the Company does not view as indicative of its ongoing financial performance, adjusted net income for 3Q20 was $82.6 million , or $0.22 per share. < Compares to my forecast of $120.4 net income, $0.29/share.

Adjusted earnings before interest, income taxes, depreciation, depletion, amortization, and exploration expense ("Adjusted EBITDAX") for 3Q20 was $290.2 million . < Compares to my forecast of $330.8 million.

Operational Update

During the third quarter of 2020, the Company placed on production 26 gross operated horizontal wells. Parsley's average working interest on wells placed on production was approximately 88%, with an average completed lateral length of approximately 9,700 feet. The Company placed on production 15 gross operated horizontal wells in the Midland Basin, with the remainder placed on production in the Delaware Basin.

After reactivating development activity in July, Parsley delivered steady improvements in drilling and completion efficiency within each basin. Notably, in the Delaware Basin, Parsley drilled its first two three-mile lateral wells in under 29 days each, which helped drive a new Company-record for Delaware drilling efficiency in 3Q20. Parsley attributes these recent drilling efficiency gains to enhancements made to the Company's remote operational command center during the activity shutdown in May and June. As operational efficiency gains take hold, the Company is delivering leading edge well costs below $850 per foot in the Delaware Basin.

In line with prior Company commentary, Parsley deployed two additional rigs in late October, bringing the current number of active operated rigs to four. The Company expects to continue operating four rigs and one-to-two frac spreads for the remainder of 2020.

[dan_s]

From Stifel 10-29-2020

Parsley Energy, Inc. (PE, $9.93, Buy; Target $16.00)
- FCF Better Than Expected, CFPS Short - Michael S. Scialla

We view the release as neutral. The positives include: i) Despite slightly higher than expected activity, 3Q20 capex/FCF was 16% below/66% above consensus; ii) Delaware Basin drilling efficiency reached a company record; iii) the borrowing base on PE's credit facility was affirmed. The negatives include: i) Adjusted EBITDA was 2% below consensus due to realized prices. In summary, operating metrics were largely in line while FCF exceeded expectations. We do not anticipate a significant stock response as investors will likely remain more focused on the expected 1Q21 closing of the PXD merger.