Parsley Energy (PE) Q2 Results

[dan_s]

PE's 2nd quarter production compares to guidance of 31.2 MBoe per day. Updating my forecast now. - Dan

AUSTIN, Texas, Aug. 3, 2016 /PRNewswire/ -- Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today announced financial and operating results for the quarter ended June 30, 2016. The Company has posted to its website a presentation that supplements the information in this release.

Second Quarter 2016 Highlights
•Net production averaged 35.7 MBoe per day, up 23% versus 1Q16 and 60% year-over-year. Net oil production increased 25% versus 1Q16 and 82% year-over-year, with oil volumes representing 66% of total production in 2Q16.
•The Company is increasing full-year 2016 production guidance from 31.5-34.5 MBoe per day to 36.0-38.0 MBoe per day.
•Lease operating expense ("LOE") per Boe decreased for the fifth consecutive quarter, down 17% versus 1Q16 to $4.37.
•Parsley is lowering full-year 2016 LOE per Boe guidance from $5.50-$6.50 to $4.50-$5.25.
•Cash general and administrative ("G&A") expense per Boe decreased 32% versus 1Q16 to $4.28.
•Parsley is lowering full-year 2016 cash G&A per Boe guidance from $4.75-$5.75 to $4.50-$5.00.
•The Company expects to complete 80-90 gross horizontal wells in 2016, up from the previous expectation of 65-75 gross horizontal wells, benefiting from ongoing efficiency gains. To accommodate these additional wells, Parsley is increasing guidance for full-year 2016 capital expenditures from $410-$460 million to $460-$510 million.
•Parsley closed previously announced acquisitions of approximately 14,200 net acres in the Southern Delaware Basin and approximately 8,700 net acres in the Midland Basin. Subsequent to the end of 2Q16, the Company also closed the previously announced acquisition of mineral rights in approximately 30,000 acres in the Southern Delaware Basin.

"The substantial production growth and cost compression Parsley generated during the second quarter are exactly what we envisioned earlier this year when we made a non-consensus decision to maintain operational momentum in the face of unsteady commodity prices," said Bryan Sheffield, Parsley's President and CEO. "We are also gratified to have closed on meaningful leasehold acquisitions in both the Midland Basin and Southern Delaware Basin at increasingly attractive prices, and to have boosted the economic potential of our promising Southern Delaware acreage by acquiring associated mineral rights. Taking a broader view, over Parsley's nine quarters as a public company, we have increased production at a 16% compound quarterly growth rate—almost entirely through the drill-bit—and built an asset base and the organizational capacity to support top-tier growth for years to come."

[dan_s]

My updated forecast model for PE will be posted to he EPG website this evening. This one is going to be upgraded by a lot of analysts after they have a chance to digest this quarterly report.

1. The company crushed everyone's production forecast
2. A very high percentage of their oil production is hedged through 2017, so very little commodity price risk.
3. YOY production growth of more than 60% is now locked in for 2016 and 2017.
4. I like their exposure to increasing natural gas and NGL prices.

I am increasing my valuation by $1.00/share to $34.50, but there is upside to that number if natural gas and NGL prices top what I am using in the forecast models.

Compared to FANG, Parsley Energy is a "Screaming Buy".

[Fosterplc]

Oh boy, tomorrow is going to be great for the PE stock. Looking forward to it.

[dan_s]

Looks like at least a few other analysts see what I see. PE up big 8/4 in the AM.

Stifel on 8/4: They rate PE a BUY with a price target of $34.00
Following PE's 10% 2Q16 production beat, management increased its FY16 production guidance (12%) and capital
budget (12%). The beat and raise was driven by continued outperformance of the company's core Midland Basin and
emerging Southern Delaware Basin Wolfcamp wells coupled with greater efficiencies and an increasing pace. We believe
successful delineation in the Southern Delaware and productivity gains achieved from the company's evolving enhanced
completion design in the Midland Basin could unlock additional value.

[Fosterplc]

Its a thing of beauty!
As a risk junkie, I also had some call options that are looking very nice.

[wilmawatts]

the price target upside is not too impressive here Dan, or am I missing something?

anotherwords a great company crushing forecasts but it is priced in, no?

[dan_s]

Parsley Energy:
> FANG trades at more than 23X CFPS
> FANG production on-track to grow 18% YOY in 2016. PE production on-track to grow 68% YOY
> Exit rates at end of 2016: FANG s/b ~44,000 Boepd, PE s/b ~45,000 Boepd

Yes, I could easily justify a higher valuation for PE.

My mission in life is to give you the tools to make your own decision.

Also, I recommend you take a hard look at RSPP, another pure play on the Permian Basin.

[setliff]

wilma. i was thinking just like you when it was at 17. we have a case here where the target just keeps going up.

dan, any way to focus further out in time? hell, a crystal ball i guess. all u can go on is what they publish as guidance, i guess,

jim

[dan_s]

If you download the PE forecast model for Parsley to Excel, you can put your estimates of future production and commodity prices at the bottom (in column S) and the model will give you a fairly good idea what that will do to earnings and cash flows.

PE has 60% to 70% YOY production growth locked in for 2016. A reasonable assumption is 50% YOY production growth for the next three years.

First Call shows revenue, EPS and CFPS estimates through 2019, but IMO they are way too low.