Energy Prospectus

Parsley Energy (PE) is an "Aggressive Growth" company in our Sweet 16. It is one of my Top Picks because when the Permian Basin Takeaway Capacity "FEAR" fades away, this incredible Permian Basin growth story should draw a lot of attention. Production growth was 77.5% year-over-year in 2017 and they are on-track for more than 60% YOY growth this.

Most of their growth is being funded by operating cash flow this year and they should be generating a lot of FREE CASH FLOW in 2019.

They tend to "under-promise and over-deliver" on production guidance. If they hit the top of this year's production guidance, my forecast for 2019 will need to go higher and so will my valuation.

29 Wall Street Analysts cover this company, but only five of them have submitted fresh reports to Reuters since Parsley released Q2 results and raised their production guidance. The five new reports show price targets of $36, $40, $43, $47, $58. My valuation is right in the middle of that pack.

PE closed at $28.31 today.

Parsley reported an unhedged oil price realization of $64.29/Bbl net of transportation costs during 2Q18. This represents a differential of just $3.62 compared to the average NYMEX WTI price for the quarter, displaying the benefits of the Company's diversified pricing exposure. Parsley also agreed in principle to bolster its takeaway capacity through multiple agreements with large oil purchasers that would, if all are completed, cover up to 165,000 Bo per day of gross operated oil production by year-end 2019.

Parsley's current insulation from weaker Midland basis differentials is the product of a proactive marketing strategy that sought to diversify regional pricing exposure more than 12 months ago.

Since Parsley released Q2 results, eight analysts have submitted updated forecasts/valuations to Reuters. Their valuations range from $36 to $58 per share. The lowest valuation appears to be using a much lower realized price than the others, much lower than I believe PE is actually going to report.

Parsley is on-track to 60% to 70% year-over-year production growth. Based on my forecast model, their cash flow from operations will be over $1.2 Billion this year and over $1.6 Billion in 2019.