Parsley Energy (PE) closes merger with JAG - Jan 10

[dan_s]

Parsley Energy Completes Acquisition Of Jagged Peak Energy < My updated Pro Forma forecast/valuation model for Parsley will be posted to the EPG home page by 10:30 AM CT. - Dan

AUSTIN, Texas, Jan. 10, 2020 /PRNewswire/ -- Parsley Energy, Inc. (NYSE: PE) ("Parsley," or "Parsley Energy") today announced that it has completed its acquisition of Jagged Peak Energy Inc. (NYSE: JAG) ("Jagged Peak"). The acquisition was previously approved by Parsley shareholders at a special meeting held on January 9, 2020, where more than 99.5% of the votes cast by Parsley stockholders were voted in favor of the proposal to issue Parsley common stock to the holders of Jagged Peak common stock as consideration for the acquisition.

Acquisition Details

At the effective time of the acquisition, each share of Jagged Peak common stock was converted into the right to receive 0.447 shares of Parsley Class A common stock. As a result of the transaction, Jagged Peak common stock will no longer be listed for trading on NYSE, and Jagged Peak will suspend its reporting obligations under the Securities Exchange Act of 1934.

In connection with the closing of the transaction, Parsley announced the appointment of S. Wil VanLoh, Jr. and Jim Kleckner to its Board of Directors. Mr. VanLoh is the Founder and Chief Executive Officer of Quantum Energy Partners and formerly served as a Jagged Peak director. Mr. Kleckner was formerly President and Chief Executive Officer of Jagged Peak and also served as a Jagged Peak director.

Management Commentary

"We first publicly announced our proposed combination with Jagged Peak less than ninety days ago," said Matt Gallagher, Parsley's President and CEO. "This collective expediency to closing allows our team to hit the ground running on these complementary, high margin assets and start capturing tangible synergies that will enhance value for our combined shareholder base. Execution will continue to speak louder than words, and our integration efforts will retain the sense of urgency and accountability that defined our successful 2019 action plan. Ultimately, we expect that the culmination of this hard work will be a more capital efficient enterprise with more free cash flow. Finally, I am excited to formally welcome Wil and Jim to our Board. I believe the Company and our shareholders will be well served by their sound financial acumen, considerable experience, and extensive network of industry contacts."

About Parsley Energy, Inc.

Parsley Energy, Inc. is an independent oil and natural gas company focused on the acquisition, development, exploration, and production of unconventional oil and natural gas properties in the Permian Basin. For more information, visit Parsley's website at www.parsleyenergy.com.

[dan_s]

On January 6th Stifel rated PE a BUY with a price target of $30.00. On the same day Stephens rated it a BUY with a price target of $26.00.

First Call's price target of $24.27 is based on 31 analysts' reports in the Reuters' database.
All of them are dated prior to the merger being completed and more than half of them are based on WTI oil price of $40-$50.

Parsley Energy by the numbers:
2018A:
> $1.31 EPS
> $1.2 Billion of operating cash flow or $4.37 per share
> 109,325 Boe per day of production (63.5% crude oil, 20.9% NGL & 15.6% natural gas)
2019E:
> $1.03 EPS
> $1.3 Billion of operating cash flow or $4.53 per share
> 141,472 Boe per day of production (61.6% crude oil, 21.5% NGL & 16.9% natural gas)
2020E:
> $1.80 EPS (compares to First Call estimate of $1.72 EPS)
> $2.1 Billion of operating cash flow or $5.60 per share < This compares to Parsley's preliminary capex budget of $1.6 to $1.9 Billion for 2020.
> 205,000 Boe per day of production (63.4% crude oil, 20.0% NGL & 16.6% natural gas)

There is upside to my 2020 forecast if NGL prices improve. Parsley's realized NGL price in 2019 was approximately $13.56/bbl, which compares to $27.05/bbl in 2018. Better pipeline access and higher demand for ethane should improve NGL prices in West Texas this year.

My updated Pro Forma forecast/valuation model for Parsley Energy (PE) has been posted to the EPG Home Page. Take a hard look at the production volumes and commodity prices that I'm using from my 2020. The forecast model is a macro driven Excel spreadsheet. You can download it and make changes to the assumptions and the spreadsheet will automatically update EPS, Operating Cash Flow and the Fair Value Estimate. I also show the six most recent analysts' price targets at the bottom of the spreadsheet.