Energy Prospectus

Stifel: "Acquisition from Double Eagle vaults PE to 2nd largest Midland Basin acreage holder. We are raising our NAV estimate
and target to $44 from $40 based on updated well analysis coupled with the additional acreage and proved reserve report."

Midland Basin Acquisition
After market close, PE announced the acquisition of 71M net acres in the Midland
Basin for $2.8B from Double Eagle Energy Permian, LLC. (Figure 1). Valuing
current production of 3.6 MBoe/d at $35M/Boe/d and 23 acquired DUCs at $75MM
implies an undeveloped acreage price of $37M/acre (Figure 2) vs. a comparative
average of $33M/acre (Figure 3).

Proved Reserves
YE16 proved reserves of 222.3 MMBoe (83% liquids, 48% developed) increased
80% y/y. Excluding PUD removals (5-year rule) and price revisions, reserve adds
replaced 705% of production at a cost of $5.03/Boe. The mid-point of updated
4Q16 production guidance (44.8-45.2 MBoe/d) is 1% below Street consensus.

Funding
The acquisitions will be funded with the issuance of 39.4MM shares to the seller,
41.4MM to the public (including 5.4MM shoe), and a $350MM private placement of
senior unsecured notes due 2025.

Raising NAV Estimate
The increase in proved reserves, Double Eagle acquisition, and additional capital
cause us to raise our total risked NAV/share estimate 10% to $44 from $40
(Figure 4). Our estimate includes 2,270 net locations compared to PE's estimate of
7,900 (4,300 well delineated).

Raising 2017 Guidance
PE now plans to add 4 rigs, 40 spuds, and 10 completions to its 2017 Midland
Basin plan and boost capex and production for the year to $1.00-$1.15B and 62-68
MBoe/d from $750-$900MM and 57-63 MBoe/d. We are lowering our 2017 CFPS
estimate 14% following the change net of the equity offering.

Strong Balance Sheet
We project YE17/YE18 debt EBITDA of 1.9x/1.1x and 2017 interest coverage of
14.9x. A credit facility with a borrowing base of $875MM ($600MM committed)
remains undrawn.

Raising Target
We are raising our target to $44 from $40 based on our revised NAV estimate.

New York, February 08, 2017 -- Moody's Investors Service (Moody's), upgraded Parsley Energy LLC's (Parsley) Corporate Family Rating (CFR) to B1 from B2, Probability of Default Rating (PDR) to B1-PD from B2-PD and senior unsecured notes to B2 from B3, and affirmed its SGL-3 Speculative Grade Liquidity (SGL) rating. At the same time, Moody's rated its proposed $350 million senior unsecured notes B2. The notes are expected to be issued to partially fund the purchase of over 70,000 net acres in the Midland Basin (Double Eagle acquisition). This acquisition is predominantly equity funded. The rating outlook remains stable.

"The upgrade reflects our expectation that Parsley Energy will continue to deliver significant production growth in 2017 while keeping a healthy balance sheet," commented Arvinder Saluja, Moody's Senior Analyst. "Management has exhibited good operating and fiscal discipline since Parsley's IPO in mid-2014 by prudently funding its drilling program and acquisitions and achieving significant production and reserves growth in a tough industry environment."

Good analysis of PE here: http://finance.yahoo.com/news/big-permi ... 23858.html

Parsley Energy's decline from recent highs of $38 to current levels of $31 is a buying opportunity, but the reason for the correction also needs to be discussed.

The key factor that has triggered stock correction is the company's offering of Class A common stock. Parsley Energy announced on Feb. 7 that it has priced an underwritten public offering of 36,000,000 shares of Class A common stock for total gross proceeds of approximately $1.116 billion. The proceeds from this offering will be used to fund the company's big Permian Basin acquisition along with proceeds from the $450.0 million private placement of senior unsecured notes due 2025.

The equity dilution is likely to have an impact only in the near term; as the benefit from the acquisition starts to flow in the form of higher production and higher level of rig activity, the stock is likely to trend higher again. The correction is an opportunity to accumulate with a 12-to 24-month investment horizon.

It is important to mention here that Parsley Energy has been acquiring assets on a regular basis and common stock offering has also been frequent. However, the stock has continued to move higher as equity dilution has been more than offset by value creation from the acquisition.

I have updated my forecast model for Parsley, assuming the Midland Basin acquisition closes in Q1 and that the company issues the full allotment of new common stock (41.4 million shares).

My valuation of PE drops $8.75 to $42.00/share, which compares to First Call's Price Target of $45.52.

DON'T PANIC. Before one of you sends me an e-mail because of the decline, let me add that there is a lot of upside to my valuation. Parsley's Q4 2017 production guidance is 75,000 to 85,000 BOE per day. If Q4 actuals are at the top end of that range and their exit rate is over 90,000 BOE per day, then my production forecast for 2018 (100,000 BOE per day) is way too low.

Parsley now plans to ramp up to a 14 rig drilling program. That means that they are going to report BIG INCREASES in production quarter-after-quarter. If production growth like that is combined with increasing oil prices, this stock could easily go to $50.

Remember, my valuations are what I think a company is worth TODAY. That is different than a price target.