Parsley Energy (PE)
Posted: Mon Apr 02, 2018 10:46 am
Parsley Energy (PE) is one of the Permian Basin "pure plays" in our Sweet 16. My valuation (based on $60/bbl WTI for all future periods) is $40/share.
From TPH on 4/2/2018:
PE Stock Thoughts: Company remains a core holding in the Small- Mid- cap space
Recommendation: BUY | Target: $45.00
Since our February 8th deep-dive/update, client interest has remained extremely high both on the road and via incoming calls with analysts and PMs alike as the early sell off at the beginning of the year looked like an opportunity to generate alpha in 2018. With the name up ~30% vs peers of ~10% we sense investors have a better understanding of issues that drove 2017 underperformance (downspacing) that will not repeat in 2018 and beyond. That being said, we still feel PE is a core holding in the SMID cap space as we believe high grading of the 2018+ rig count towards Upton and Northern Midland in combination with a laser-tight focus on execution by management will continue to march equity higher as PE beat and raises against sell side numbers this year (TPHe 105.2mboepd vs Street 102.9).
Equity trading at 4.7x 2020 EV/EBITDA at strip with 55% upside to NAV of $45.
Inventory and NAV expansion to be driven by Wolfcamp C delineation by the company and Wolfcamp D delineation by PXD. Company is in good shape on crude marketing as Medallion and Navigator pipelines move crude to Crane, Midland, and Colorado City. From there third party long-haul contracts help ship volumes away from the basin. On gas, the vast majority of product is sold to Targa who appears to have done a good job on contracting FT to help cover the majority of volumes moving towards the Gulf vs. across the border to Mexico.
From TPH on 4/2/2018:
PE Stock Thoughts: Company remains a core holding in the Small- Mid- cap space
Recommendation: BUY | Target: $45.00
Since our February 8th deep-dive/update, client interest has remained extremely high both on the road and via incoming calls with analysts and PMs alike as the early sell off at the beginning of the year looked like an opportunity to generate alpha in 2018. With the name up ~30% vs peers of ~10% we sense investors have a better understanding of issues that drove 2017 underperformance (downspacing) that will not repeat in 2018 and beyond. That being said, we still feel PE is a core holding in the SMID cap space as we believe high grading of the 2018+ rig count towards Upton and Northern Midland in combination with a laser-tight focus on execution by management will continue to march equity higher as PE beat and raises against sell side numbers this year (TPHe 105.2mboepd vs Street 102.9).
Equity trading at 4.7x 2020 EV/EBITDA at strip with 55% upside to NAV of $45.
Inventory and NAV expansion to be driven by Wolfcamp C delineation by the company and Wolfcamp D delineation by PXD. Company is in good shape on crude marketing as Medallion and Navigator pipelines move crude to Crane, Midland, and Colorado City. From there third party long-haul contracts help ship volumes away from the basin. On gas, the vast majority of product is sold to Targa who appears to have done a good job on contracting FT to help cover the majority of volumes moving towards the Gulf vs. across the border to Mexico.