Parsley Energy (PE)

[dan_s]

Parsley Energy (PE) announced financial and operating results for the quarter ended March 31, 2017. The Company has posted to its website a presentation that supplements the information in this release.

First Quarter 2017 Highlights

> Net production averaged 54.8 MBoe per day, up 21% versus 4Q16 and 88% year-over-year. Daily net oil production increased 23% versus 4Q16 and 98% year-over-year, with oil volumes representing 69% of total production in 1Q17. < My forecast was 51.0 MBoe per day for Q1
> The Company is increasing full-year 2017 net production guidance from 62-68 MBoe per day to 65-71 MBoe per day and also increasing estimated average 4Q17 net production from 75-85 MBoe per day to 78-88 MBoe per day. At the midpoints, the updated ranges translate to estimated production growth of 78% in 2017 versus 2016 and 84% in 4Q17 versus 4Q16.
> Parsley reiterates estimated full-year 2017 capital expenditures of $1.0-$1.15 billion.
> Lease operating expense ("LOE") per Boe held steady at $3.57 compared to $3.56 in 4Q16.
> The Company is lowering full-year 2017 LOE per Boe guidance from $4.00-$4.75 to $3.50-$4.50.
> Parsley reduced general and administrative expense ("G&A") per Boe by 13% versus 4Q16 to $4.88 in 1Q17 and reduced cash G&A per Boe, which excludes stock-based compensation expense, by 16% to $4.02 over the same period.
> The Company is lowering full-year 2017 cash G&A per Boe guidance from $4.50-$5.25 to $4.00-$5.00.

Note that if you add up all of Parsley's cash expenses they are less than $10/Boe of production. This company is a Cash Flow Machine. - Dan

Subsequent to the end of 1Q17, Parsley closed the previously announced acquisition (the "Double Eagle Acquisition") of approximately 71,000 net acres in the core of the Midland Basin from Double Eagle Energy Permian, LLC and certain of its affiliates ("Double Eagle"), increasing Parsley's total leasehold to approximately 230,000 net acres in the Permian Basin.

Also subsequent to the end of 1Q17, Parsley executed acreage trades that blocked up acreage acquired from Double Eagle and delivered to the Company approximately 155 net horizontal drilling locations with an average lateral length of approximately 7,000 feet. The trades also extended approximately 70 net horizontal drilling locations by an average of approximately 4,000 feet. Net of assets traded away, these trades added more than 900,000 net lateral feet to Parsley's horizontal drilling inventory.

Initial well results on acreage acquired from Double Eagle in southeast Martin County confirmed the presence of at least three productive target formations in the area. Three wells with 1.5-mile laterals targeting the Lower Spraberry, Wolfcamp A, and Wolfcamp B formations, respectively, completed in tandem with a stack/stagger configuration on the Strain Ranch lease, are each producing at least 1,300 Boe per day after more than 30 days of production.

Parsley's first well targeting the Wolfcamp C formation, the Taylor 45-33-4601H, completed with a 2-mile lateral in Reagan County, registered a peak 30-day rate of 3,135 Boe per day, representing one of the strongest peak 30-day rates ever recorded in the Midland Basin.

On April 28, Parsley amended its revolving credit agreement, thereby increasing its borrowing base by 60% to $1.4 billion, with a Company-elected commitment amount of $1.0 billion. As of the end of 1Q17, pro-forma for the closing of the Double Eagle Acquisition and for the newly elected commitment amount, liquidity stands at $1.6 billion, consisting of $616 million of cash on hand and $997 million of undrawn borrowing capacity on the revolving credit facility.

"Never has Parsley Energy's focus on execution and operational excellence been more apparent than during the first quarter of 2017, in which we added close to 10,000 net Boe per day on average even as we carried out transformative acquisitions totaling approximately 94,000 net acres," said Bryan Sheffield, Parsley's Chairman and CEO. "Increasing our production guidance for the year while holding capex expectations steady and lowering unit cost estimates sets the stage for a year of superior value creation."

[dan_s]

During 1Q17, the Company recorded net income attributable to its stockholders of $29.4 million, or $0.13 per weighted average share, compared to a net loss of $30.7 million, or $0.17 per weighted average share, during 4Q16. Excluding, on a tax-adjusted basis, certain items that the Company does not view as indicative of its ongoing financial performance, and adding back the non-controlling interest allocated to Class B stockholders, adjusted net income for 1Q17 was $34.2 million, or $0.15 per diluted share, compared to $11.8 million, or $0.06 per diluted share, in 4Q16. < Compares to my forecast of $0.09 Adjusted EPS

[dan_s]

Parsley Energy is a "Very Aggressive Growth" company. First Call's numbers have not been updated since the company released Q1 results, which were very good.

I have updated my forecast model for PE and it will be posted to the EPG website later today.

My valuation increases by $3.50 to $47.00/share, which compares to First Call's price target of $44.24. I have more confidence in my numbers now. I was not quite sure that Parsley could deliver the production growth they announced earlier this year. Now it appears that they will exceed the top end of that initial guidance. This company is now on-track to generate over 80% year-over-year production growth. They have gone from 20,000 BOE per day in 2015 to 54,789 BOE per day in Q1 2017 and they are on-track to exit this year at ~95,000 BOE per day.

Revenues will exceed $1.0 Billion this year! < Cash on hand + cash flow from operations will more than cover their aggressive drilling program in the Permian Basin.

If you own PE just hang tough. Growth like this will get noticed by the Wall Street Gang.