Parsley Energy (PE) Update - Sept 21
Posted: Fri Sep 21, 2018 11:11 am
Note from TPH on 9-21-2018:
They rate PE a BUY with a valuation of $53/share, which compares to my valuation of $54.
Near-term, we see a strong Q3 on the horizon with production at 117.8mboepd (74.4mbpd oil) vs. the Street's 114.2mboepd (72.3mbpd oil) as high-grading towards a greater concentration of TILs in Upton, Martin, and Midland Counties relative to H1'18 (where Glasscock and Reagan accounted for a larger portion of activity) are expected to drive outperformance. Efficiency gains captured YTD likely to hold providing potential for upside to the 40 gross POPs management previously guided, pushing our Q3 capex higher (TPHe $437MM vs. Street $406MM) with FY'18 at $1.75B. Stimulation pricing discounts and regional sand acceleration help ease cost concerns into 2019 when we're modeling a $1.95B (Street $1.87B) capex budget for 146mboepd/93mpbd oil (Street 145/93), but a strong Q4'19 rate of 165mboepd (Street 158) given the H2'19 weighting of our completion cadence. Longer-term, the equity remains one of our favorites given valuation at current levels (86% upside; 3.8x 2020 EV/EBITDA at $66/bbl Brent 2021+LT) and forthcoming catalysts in the next 6-18 months (i.e. capital efficiency gains moving to larger pads, minerals business).
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TIL = "Tied Into Line" / Completed to sales
If TPH's Q4 2019 production forecast is confirmed, my valuation of PE needs to go higher.
They rate PE a BUY with a valuation of $53/share, which compares to my valuation of $54.
Near-term, we see a strong Q3 on the horizon with production at 117.8mboepd (74.4mbpd oil) vs. the Street's 114.2mboepd (72.3mbpd oil) as high-grading towards a greater concentration of TILs in Upton, Martin, and Midland Counties relative to H1'18 (where Glasscock and Reagan accounted for a larger portion of activity) are expected to drive outperformance. Efficiency gains captured YTD likely to hold providing potential for upside to the 40 gross POPs management previously guided, pushing our Q3 capex higher (TPHe $437MM vs. Street $406MM) with FY'18 at $1.75B. Stimulation pricing discounts and regional sand acceleration help ease cost concerns into 2019 when we're modeling a $1.95B (Street $1.87B) capex budget for 146mboepd/93mpbd oil (Street 145/93), but a strong Q4'19 rate of 165mboepd (Street 158) given the H2'19 weighting of our completion cadence. Longer-term, the equity remains one of our favorites given valuation at current levels (86% upside; 3.8x 2020 EV/EBITDA at $66/bbl Brent 2021+LT) and forthcoming catalysts in the next 6-18 months (i.e. capital efficiency gains moving to larger pads, minerals business).
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TIL = "Tied Into Line" / Completed to sales
If TPH's Q4 2019 production forecast is confirmed, my valuation of PE needs to go higher.