PE - Credit Suisse Update
Posted: Sat Mar 04, 2017 2:23 pm
Parsley Energy (PE) - Credit Suisse report dated March 1, 2017:
Pecos County Focused in 2017
■ Reiterate Outperform. We maintain our Outperform rating on PE and $46
TP after incorporating year end results and updated proved reserves. While
initial concerns existed on the dispersion of the Double Eagle Midland
acreage recently acquired, management noted an ability to quickly increase
working interest at attractive price points. We also adjust our 2017/18 EPS
estimates by +$0.19/$0.18 while introducing a 2019 estimate of $2.47.
■ Delaware Results Rolling In. In tandem with 4Q16 results, PE announced a
30-d rate of 1,929 boe/d on its first drilled and completed Delaware well
(Lincoln 4-1-4307H), located in Reeves County. PE additionally reported a
24-hr test rate on their second drilled Reeves County well (Kauffman C4-6-
4307H), which tested at 2,666 boe/d, making it the highest 24-hr rate to date
across PE's asset base. Within we show PE's top 20 Midland test rates as
well as recorded Delaware 24-hr rates to date. Looking to 2017, PE will
begin moving the Delaware program into Pecos County (where the mineral
uplift provides a significant NPV bump), as 35% of the '17 D&C budget
($840-960mm) will be allocated to the Delaware, of which, two-thirds will be
go to Pecos County. We forecast a 2017 capex spend of $1,050mm will drive
yoy companywide production growth of 73% compared to guidance implying
a range of $1,000-1,150mm delivering growth of 62-78%. PE expects 4Q17
production of 75-85 Mboe/d, while we forecast production of 81.9 Mboe/d,
implying 4Q17/4Q16 growth of 82%.
■ Valuation. Our $46 TP on PE implies 45% upside compared to 29% for our
coverage universe. On multiples, PE trades 16.1x and 10.3x 2017 and 2018
unhedged EBITDA at the strip, compared to 9.4x and 7.4x, respectively.
Primary risks to our valuation include commodity prices and operational
impediments from a large growth strategy.
Pecos County Focused in 2017
■ Reiterate Outperform. We maintain our Outperform rating on PE and $46
TP after incorporating year end results and updated proved reserves. While
initial concerns existed on the dispersion of the Double Eagle Midland
acreage recently acquired, management noted an ability to quickly increase
working interest at attractive price points. We also adjust our 2017/18 EPS
estimates by +$0.19/$0.18 while introducing a 2019 estimate of $2.47.
■ Delaware Results Rolling In. In tandem with 4Q16 results, PE announced a
30-d rate of 1,929 boe/d on its first drilled and completed Delaware well
(Lincoln 4-1-4307H), located in Reeves County. PE additionally reported a
24-hr test rate on their second drilled Reeves County well (Kauffman C4-6-
4307H), which tested at 2,666 boe/d, making it the highest 24-hr rate to date
across PE's asset base. Within we show PE's top 20 Midland test rates as
well as recorded Delaware 24-hr rates to date. Looking to 2017, PE will
begin moving the Delaware program into Pecos County (where the mineral
uplift provides a significant NPV bump), as 35% of the '17 D&C budget
($840-960mm) will be allocated to the Delaware, of which, two-thirds will be
go to Pecos County. We forecast a 2017 capex spend of $1,050mm will drive
yoy companywide production growth of 73% compared to guidance implying
a range of $1,000-1,150mm delivering growth of 62-78%. PE expects 4Q17
production of 75-85 Mboe/d, while we forecast production of 81.9 Mboe/d,
implying 4Q17/4Q16 growth of 82%.
■ Valuation. Our $46 TP on PE implies 45% upside compared to 29% for our
coverage universe. On multiples, PE trades 16.1x and 10.3x 2017 and 2018
unhedged EBITDA at the strip, compared to 9.4x and 7.4x, respectively.
Primary risks to our valuation include commodity prices and operational
impediments from a large growth strategy.