Parsley Energy Announces Fourth Quarter 2017 Financial And Operating Results; Announces Officer Promotions
AUSTIN, Texas, Feb. 21, 2018 /PRNewswire/ -- Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today announced financial and operating results for the quarter ended December 31, 2017. The Company has posted to its website a presentation that supplements the information in this release.
Fourth Quarter 2017 Highlights
-- Net production averaged 80.3 MBoe per day, up 12% versus 3Q17 and 78%
year-over-year. Net oil production increased 9% quarter-over-quarter and
69% year-over-year.
-- Parsley's previously announced 2018 oil production guidance of 65-70 MBo
per day represents year-over-year growth of 50% at the midpoint.
-- Lease operating expense ("LOE") per Boe decreased 23% versus 3Q17 to
$3.44.
-- Favorable trends in unit costs supported a 23% quarter-over-quarter
increase in Parsley's pre-hedge cash margin to $31.45 per Boe.((1))
-- The Company recently executed several high-impact acreage trades that
will facilitate extended lateral lengths in its core Upton County
footprint. Net of acreage traded away, Parsley added approximately 0.4
million net lateral feet to the Company's horizontal drilling inventory
through trades executed since its last quarterly update in November.
-- Proved reserves of 416 MMBoe as of December 31, 2017 represent an 87%
increase versus proved reserves as of December 31, 2016. Proved
developed reserves of 209 MMBoe as of December 31, 2017 represent a 97%
increase versus proved developed reserves as of December 31, 2016.
"Following a transformative 2017 for Parsley Energy, we are eager to efficiently harvest the ample resource base our team has assembled, tested, and optimized," said Bryan Sheffield, Parsley's Chairman and CEO. "Even at a steady activity pace, we look forward to delivering compelling high-margin growth on a simplified 2018 development program."
Operational Highlights
During 4Q17, Parsley spud 42 and completed 41 horizontal wells with an average working interest of 95% and an average lateral length of approximately 9,500 feet.
Parsley's 4Q17 activity included a three-well stacked pad in Martin County targeting the Lower Spraberry, Wolfcamp A, and Wolfcamp B zones. The Strain Ranch 12-1 pad is part of the Company's growing activity on its expanded asset base in the northern Midland Basin. Early results from these three 1.5 mile lateral wells are promising, with peak 30-day production rates averaging 175 Boe (139 Bo) per day per thousand lateral feet.
"Acquisitions completed in 2017 transformed the long-term resource potential of our Company," said Matt Gallagher, Parsley's President and COO. "Results like the Strain Ranch pad highlight the high-return opportunity set we possess, and having integrated and gained experience on acquired assets, we are prepared to capitalize on this sizable resource opportunity."
Financial Highlights
During 4Q17, the Company recorded net income attributable to its stockholders of $49.9 million, or $0.20 per weighted average share, compared to a net loss of $13.3 million, or $0.05 per weighted average share, during 3Q17. 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 4Q17 was $95.9 million, or $0.30 per diluted share, compared to $29.3 million, or $0.12 per weighted average share, during 3Q17.((2))
Adjusted earnings before interest, income taxes, depreciation, depletion, amortization, and exploration expense ("Adjusted EBITDAX") for 4Q17 was $217 million, up 32% compared to 3Q17.((3))
Parsley registered favorable quarter-over-quarter trends in unit costs. LOE per Boe decreased from $4.49 in 3Q17 to $3.44 in 4Q17. General and administrative expense ("G&A") per Boe decreased from $5.10 in 3Q17 to $4.72 in 4Q17, while cash G&A per Boe, which excludes stock-based compensation expense, decreased from $4.32 in 3Q17 to $4.04 in 4Q17. Depreciation, depletion, and amortization expense per Boe decreased from $14.41 in 3Q17 to $14.23 in 4Q17.
Reported capital expenditures increased from $307 million in 3Q17 to $417 million in 4Q17, reflecting a 41% quarter-over-quarter increase in net completed footage, as well as increases in facilities and infrastructure spending and non-operated development.
Solid Balance Sheet and Advantaged Hedge Position
Parsley entered 2018 with a strong balance sheet. As of December 31, 2017, the Company had approximately $1.7 billion of liquidity, consisting of $703 million of cash, cash equivalents, and short-term investments and an undrawn amount of $997 million on the Company's revolver.((4) )Pro forma for the January 2018 divestiture of certain non-operated properties, the Company likewise had approximately $1.7 billion of liquidity, consisting of $739 million of cash, cash equivalents, and short-term investments and an undrawn amount of $997 million on the Company's revolver.((4) ) Parsley's proactive hedging strategy protects its balance sheet and anticipated cash flow while retaining commodity price upside.
For details on Parsley's hedging position, please see the tables below under Supplemental Information, the presentation posted to the Company's website, and/or the Company's Annual Report on Form 10-K, upon availability, for the year ended December 31, 2017.
Full-year 2018 Guidance
2018E
-----
Production
----------
Annual net oil production (MBo/d) 65-70
Annual net total production (MBoe/d) 98-108
Capital Program
---------------
Total development expenditures ($MM) $1,350-$1,550
Drilling and completion (% of total) 85-90%
Facilities, Infrastructure & Other (%
of total) 10-15%
Activity
--------
Gross operated horizontal POPs(1) ~160
Midland Basin (% of total) ~75%
Delaware Basin (% of total) ~25%
Average lateral length ~9,500'
Average working interest ~90%
Unit Costs
----------
Lease operating expenses ($/Boe) $3.75-$5.00
Cash general and administrative
expenses ($/Boe) $3.50-$4.25
Production and ad valorem taxes (% of
revenue) 6.0%-7.0%
"POPs"
defined as
wells
placed on
(1) production.
Year-end 2017 Reserves
Parsley posted strong reserves growth in 2017. The Company's proved reserves as of December 31, 2017 totaled 416.4 MMBoe, consisting of 248.5 MMbo, 451.7 Bcf, and 92.6 MMboe of natural gas liquids ("NGLs").
Proved Reserve Highlights
-- Relative to proved reserves as of December 31, 2016, proved reserves as
of December 31, 2017 increased 87% to 416.4 MMBoe, while proved
developed reserves increased 97% to 209.4 MMBoe. Proved developed
reserves as of December 31, 2017 represent 50% of total proved reserves.
-- Total reserves increased by 194.1 MMBoe as compared to 2017 production
volumes of 24.8 MMBoe.
-- Organic reserves replacement ratio of 683%.((5))
-- Parsley's standardized measure of discounted future net cash flows
relating to proved reserves ("standardized measure") at December 31,
2017 was $3.0 billion, an increase of 155% relative to the Company's
standardized measure at December 31, 2016. At SEC Pricing, the pre-tax
PV-10 of proved reserves was $3.9 billion at December 31, 2017, an
increase of 164% relative to the corresponding measure at December 31,
2016.((6))
-- At SEC Pricing, the pre-tax PV-10 of proved developed reserves was $2.5
billion at December 31, 2017, an increase of over 150% relative to the
corresponding measure at December 31, 2016.((6))
-- Positive performance revisions of 4.5 MMBo to oil proved developed
producing ("PDP") reserves estimates indicate the stability of the
Company's asset base.
Changes in reserves for the year ended December 31, 2017 are summarized in the table below:
(MMBoe)
Balance, December 31, 2016 222.3
Purchases of reserves in place 55.8
Divestures of reserves in place (6.5)
Extensions and discoveries 160.3
Revisions of previous estimates 9.2
Production (24.8)
-----
Balance, December 31, 2017 416.4
Parsley's internally prepared estimated proved reserves as of December 31, 2017 were audited by Netherland, Sewell & Associates, the Company's independent reserve engineer. These estimates have been prepared in accordance with the definitions and regulations of the U.S. Securities and Exchange Commission and conform to the FASB Accounting Standards Codification Topic 932, Extractive Activities - Oil and Gas. Prices used are based on the 12-month unweighted arithmetic average of the first-day-of-the-month price for each month in the period January through December 2017. Adjusting for quality, transportation fees, and market differentials, the pricing is as follows: $49.17 per barrel of oil, $22.20 per barrel of NGL, and $2.53 per Mcf of gas. The estimates of the Company's net reserves as of December 31, 2017 are summarized in the table below:
Net Reserves
Oil (MMbo) Gas (Bcf) NGL (MMboe) Total (MMboe)
--------- -------- ---------- ------------
PDP 118.5 237.2 49.1 207.2
PNP 1.1 3.1 0.6 2.2
PUD 128.9 211.4 42.9 207.0
----- ----- ---- -----
Total
Proved 248.5 451.7 92.6 416.4
----- ----- ---- -----
Officer Promotions
As part of Parsley's ongoing commitment to operational excellence, the Company has promoted Larry Parnell to Senior Vice President-Development Operations, Carrie Endorf to Vice President-Reservoir Engineering and Planning, and Jody Jordan to Vice President-Marketing, effective February 1, 2018.
Bryan Sheffield, the Company's Chairman and Chief Executive Officer, said, "It is my pleasure to announce the promotions of Larry Parnell, Carrie Endorf, and Jody Jordan. These individuals earned their promotions through superior leadership of their respective groups and the substantial individual contributions that each has made to Parsley. I am happy to have Larry, as Senior Vice President-Development Operations, join with Paul Treadwell, Senior Vice President-Production Operations, to manage our operational activity as we focus on executing our simplified 2018 program. Likewise, Carrie and Jody bring unique skills and depth of expertise to their roles, and I look forward to their future contributions."
Conference Call Information
Parsley Energy will host a conference call and webcast to discuss its results for the fourth quarter of 2017 on Thursday, February 22 at 9:00 a.m. Eastern Time (8:00 a.m. Central Time). Participants should call 877-407-0672 (United States/Canada) or 412-902-0003 (International) 10 minutes before the scheduled time and request the Parsley Energy conference call. A telephone replay will be available shortly after the call through March 8, 2018 by dialing 877-660-6853 (United States/Canada) or 201-612-7415 (International). Conference ID: 13674991. A live broadcast will also be available at www.parsleyenergy.com under the "Investor Relations" section of the website. The Company has also posted to its website a presentation that supplements the information in this release.
About Parsley Energy, Inc.
Parsley Energy, Inc. is an independent oil and natural gas company focused on the acquisition and development of unconventional oil and natural gas reserves in the Permian Basin in West Texas. For more information, visit the Company's website at www.parsleyenergy.com.
Forward Looking Statements
Certain statements contained in this news release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent Parsley Energy's expectations or beliefs concerning future events, and it is possible that the results described in this news release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Parsley Energy's control, which could cause actual results to differ materially from the results discussed in the forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, Parsley Energy does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for Parsley Energy to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements found in the Company's filings with the Securities and Exchange Commission ("SEC"), including its Annual Report on Form 10-K. The risk factors and other factors noted in the Company's SEC filings could cause its actual results to differ materially from those contained in any forward-looking statement.
(1) "Pre-hedge cash margin"
as used in this release
represents the Company's
average sales price in a
period (without realized
derivatives) expressed
in barrels of oil
equivalent (Boe) less
lease operating expense
per Boe, production and
ad valorem taxes per
Boe, and general and
administrative expense
per Boe (exclusive of
stock-based
compensation). Sales
price and cost
components referenced in
pre-hedge cash margin
calculation can be found
in "Selected Operating
Data" in accompanying
financial tables.
(2) "Adjusted net income" is
not presented in
accordance with
generally accepted
accounting principles in
the United States
("GAAP"). Please see the
supplemental financial
information at the end
of this news release for
definitions and
reconciliation of the
non-GAAP financial
measure of adjusted net
income to GAAP financial
measures.
(3) "Adjusted EBITDAX" is not
presented in accordance
with generally accepted
accounting principles in
the United States
("GAAP"). Please see the
supplemental financial
information at the end
of this news release for
definitions and
reconciliation of the
non-GAAP financial
measure of adjusted
EBITDAX to GAAP
financial measures.
(4) Revolver balance is net
of $3 million letters of
credit which do not
change the status of the
Company's fully undrawn
borrowing base.
(5) "Organic reserves
replacement" calculated
as total 2017 reserve
additions and revisions
(technical and pricing)
divided by total 2017
production; excludes
acquisitions and
divestitures.
(6) "Pre-tax PV-10" is not
presented in accordance
with GAAP in the United
States. Please see the
supplemental financial
information at the end
of this news release for
a definition and
reconciliation of the
non-GAAP financial
measure of pre-tax PV10
to a GAAP financial
measure.
- Tables to Follow -
Parsley Energy, Inc. and Subsidiaries
Selected Operating Data
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2017 2016 2017 2016
---- ---- ---- ----
Net production volumes:
Oil (MBbls) 4,737 2,811 16,390 9,368
Natural gas (MMcf) 7,221 3,812 23,326 13,463
Natural gas liquids
(MBbls) 1,449 704 4,512 2,390
Total (MBoe) 7,390 4,150 24,792 14,002
Average net daily
production (Boe/d) 80,327 45,109 67,923 38,257
====== ====== ====== ======
Average sales prices: (1)
Oil, without realized
derivatives (per Bbl) $53.95 $46.76 $48.95 $41.34
Oil, with realized
derivatives (per Bbl) $50.88 $49.41 $47.68 $47.56
Natural gas, without
realized derivatives
(per Mcf) $2.15 $2.91 $2.43 $2.30
Natural gas, with
realized derivatives
(per Mcf) $2.13 $2.91 $2.40 $2.30
NGLs (per Bbl) $26.84 $19.12 $22.87 $16.01
Total, without
realized derivatives
(per Boe) $41.94 $37.59 $38.80 $32.60
Total, with realized
derivatives (per Boe) $39.96 $39.39 $37.94 $36.76
====== ====== ====== ======
Average costs (per Boe):
Lease operating
expenses $3.44 $3.56 $4.12 $4.23
Production and ad
valorem taxes $3.01 $2.15 $2.41 $1.99
Depreciation,
depletion and
amortization $14.23 $15.10 $14.21 $16.70
General and
administrative
expenses (including
stock-based
compensation) $4.72 $5.61 $5.01 $6.04
General and
administrative
expenses (cash based) $4.04 $4.79 $4.22 $5.12
(1) Average prices shown in the table
include transportation and
gathering costs and reflect
prices both before and after the
effects of the Company's realized
commodity hedging transactions.
The Company's calculation of such
effects includes both realized
gains and losses on cash
settlements for commodity
derivative transactions and
premiums paid or received on
options that settled during the
period.
Parsley Energy, Inc. and Subsidiaries
Consolidated Statements of Operations (1)
(Unaudited, in thousands, except for per share data)
Three Months Ended Year Ended
December 31, December 31,
2017 2016 2017 2016
---- ---- ---- ----
REVENUES
Oil sales $255,554 $131,438 $802,230 $387,303
Natural gas sales 15,520 11,094 56,571 30,928
Natural gas liquids sales 38,897 13,462 103,193 38,273
Other 1,517 (118) 5,050 1,269
----- ---- ----- -----
Total revenues 311,488 155,876 967,044 457,773
------- ------- ------- -------
OPERATING EXPENSES
Lease operating expenses 25,386 14,784 102,169 59,293
Production and ad valorem taxes 22,274 8,923 59,641 27,916
Depreciation, depletion and
amortization 105,143 62,653 352,247 233,766
General and administrative
expenses 34,879 23,290 124,255 84,591
Exploration and abandonment
costs 35,122 1,152 40,415 13,931
Acquisition costs 8 155 10,977 1,081
Accretion of asset retirement
obligations 374 157 971 732
Other operating expenses 2,363 1,549 9,568 5,316
----- ----- ----- -----
Total operating expenses 225,549 112,663 700,243 426,626
------- ------- ------- -------
OPERATING INCOME 85,939 43,213 266,801 31,147
------ ------ ------- ------
OTHER INCOME (EXPENSE)
Interest expense, net (32,402) (16,468) (97,381) (56,225)
Loss on sale of property (14,332) - (14,332) (119)
Loss on early extinguishment of
debt - (36,335) (3,891) (36,335)
Loss on derivatives (72,310) (26,993) (66,135) (50,835)
Change in TRA liability 56,396 7,351 35,847 7,351
Interest income 2,374 189 7,936 992
Other (expense) income (498) (713) 783 (2,317)
---- ---- --- ------
Total other expense, net (60,772) (72,969) (137,173) (137,488)
INCOME (LOSS) BEFORE INCOME
TAXES 25,167 (29,756) 129,628 (106,341)
INCOME TAX BENEFIT (EXPENSE) 19,830 (4,341) (5,708) 17,424
------ ------ ------ ------
NET INCOME (LOSS) 44,997 (34,097) 123,920 (88,917)
LESS: NET LOSS (INCOME)
ATTRIBUTABLE TO NONCONTROLLING
INTERESTS 4,922 3,352 (17,146) 14,735
----- ----- ------- ------
NET INCOME (LOSS) ATTRIBUTABLE
TO PARSLEY ENERGY INC.
STOCKHOLDERS $49,919 $(30,745) $106,774 $(74,182)
======= ======== ======== ========
Net income (loss) per common share: (2)
Basic $0.20 $(0.17) $0.44 $(0.46)
Diluted $0.16 $(0.17) $0.42 $(0.46)
Weighted average common shares outstanding:
Basic 249,659 178,990 240,733 161,793
Diluted 314,864 178,990 296,512 161,793
(1) Certain reclassifications to prior
period amounts have been made to
conform with current presentation.
(2) For the three months and year ended
December 31, 2016 the number of
weighted average diluted shares used
to calculate net income(loss) per
share is based on the fact that, under
the "if converted" and treasury stock
methods, Class B Common Stock and
restricted stock and restricted stock
units were not recognized because they
would have been antidilutive.
Parsley Energy, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, 2017 December 31, 2016
----------------- -----------------
(In thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $554,189 $133,379
Short-term investments 149,283 -
Restricted cash - 3,290
Accounts receivable:
Joint interest owners and
other 42,174 12,698
Oil, natural gas and NGLs 123,147 59,174
Related parties 388 290
Short-term derivative
instruments 41,957 39,708
Assets held for sale 1,790 -
Other current assets 6,558 50,949
----- ------
Total current assets 919,486 299,488
------- -------
PROPERTY, PLANT AND EQUIPMENT
Oil and natural gas
properties, successful
efforts method 8,551,314 4,063,417
Accumulated depreciation,
depletion, amortization and
impairment (822,459) (506,175)
-------- --------
Total oil and natural gas
properties, net 7,728,855 3,557,242
--------- ---------
Other property, plant and
equipment net 106,587 59,318
------- ------
Total property, plant and
equipment, net 7,835,442 3,616,560
--------- ---------
NONCURRENT ASSETS
Assets held for sale, net 14,985 -
Long-term derivative
instruments 15,732 16,416
Other noncurrent assets 7,553 6,318
----- -----
Total noncurrent assets 38,270 22,734
------ ------
TOTAL ASSETS $8,793,198 $3,938,782
========== ==========
Parsley Energy, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
December 31, 2017 December 31, 2016
----------------- -----------------
(In thousands)
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
expenses $407,698 $162,317
Revenue and severance taxes payable 109,917 69,452
Current portion of long-term debt 2,352 67,214
Short-term derivative instruments 84,919 44,153
Current portion of asset retirement
obligations 7,203 1,818
Total current liabilities 612,089 344,954
NONCURRENT LIABILITIES
Liabilities related to assets held
for sale 405 -
Long-term debt 2,179,525 1,041,324
Asset retirement obligations 19,967 9,574
Deferred tax liability, net 21,403 5,483
Payable pursuant to tax receivable
agreement 58,479 94,326
Long-term derivative instruments 20,624 12,815
Total noncurrent liabilities 2,300,403 1,163,522
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value,
50,000,000 shares authorized, none
issued and outstanding - -
Common stock
Class A, $0.01 par value,
600,000,000 shares authorized,
252,419,601 shares issued and
252,260,300 shares outstanding at
December 31, 2017 and 179,730,033
shares issued and 179,590,617
shares outstanding at December 31,
2016 2,524 1,797
Class B, $0.01 par value,
125,000,000 shares authorized,
62,128,257 and 28,008,573 issued
and outstanding at December 31,
2017 and December 31, 2016 622 280
Additional paid in capital 4,666,365 2,151,197
Retained earnings (accumulated
deficit) 43,519 (63,255)
Treasury stock, at cost, 159,301
shares and 139,416 at December 31,
2017 and December 31, 2016 (735) (381)
---- ----
Total stockholders' equity 4,712,295 2,089,638
Noncontrolling interest 1,168,411 340,668
--------- -------
Total equity 5,880,706 2,430,306
--------- ---------
TOTAL LIABILITIES AND EQUITY $8,793,198 $3,938,782
========== ==========
Parsley Energy, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Year Ended December 31,
2017 2016
---- ----
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $123,920 $(88,917)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and
amortization 352,247 233,766
Inventory write down 1,060 -
Accretion of asset
retirement obligations 971 732
Loss on sale of property 14,332 119
Loss on early
extinguishment of debt 3,891 36,335
Amortization and write off
of deferred loan
origination costs 4,720 3,190
Amortization of bond
premium (516) (874)
Deferred income tax expense
(benefit) 5,752 (17,582)
Change in TRA liability (35,847) (7,351)
Stock-based compensation
expense 19,619 12,871
Loss on derivatives 66,135 50,835
Net cash received for
derivative settlements 16,172 32,364
Net cash paid for option
premiums (28,426) (10,334)
Net premiums (paid)
received on options that
settled during the period (37,103) 31,757
Other 33,719 6,169
Changes in operating assets and liabilities,
net of acquisitions:
Restricted cash 3,290 (2,151)
Accounts receivable (95,239) (35,774)
Accounts receivable-
related parties (98) 100
Other current assets 82,520 (71,052)
Other noncurrent assets (536) 748
Accounts payable and
accrued expenses 122,992 20,897
Revenue and severance taxes
payable 40,465 32,343
Net cash provided by
operating activities 694,040 228,191
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Development of oil and
natural gas properties (1,089,256) (505,802)
Acquisitions of oil and
natural gas properties (2,192,093) (1,346,190)
Additions to other property
and equipment (54,896) (33,374)
Proceeds from sale of
property 30,537 -
Purchases of short-term
investments (149,283) -
Other (1,869) -
------ ---
Net cash used in investing
activities (3,456,860) (1,885,366)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term
debt 1,152,780 1,057,500
Payments on long-term debt (74,769) (521,944)
Debt issue costs (17,371) (18,097)
Proceeds from issuance of
common stock, net 2,123,344 930,315
Purchases of common stock (354) (213)
Vesting of restricted stock
units - (91)
Net cash provided by
financing activities 3,183,630 1,447,470
--------- ---------
Net increase (decrease) in
cash and cash equivalents 420,810 (209,705)
Cash and cash equivalents
at beginning of year 133,379 343,084
------- -------
Cash and cash equivalents
at end of year $554,189 $133,379
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $63,170 $65,513
======= =======
Cash paid for income taxes $350 $315
==== ====
SUPPLEMENTAL DISCLOSURE OF NON-CASH
ACTIVITIES:
Asset retirement
obligations incurred,
including changes in
estimate $15,428 $(6,646)
======= =======
Additions (reductions) to
oil and natural gas
properties -change in
capital accruals $118,145 $(9,831)
======== =======
Additions to other property
and equipment funded by
capital lease borrowings $3,904 $2,758
====== ======
Common stock issued for oil
and natural gas properties $1,183,501 $ -
========== === ===
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDAX
Adjusted EBITDAX is not a measure of net income as determined by GAAP. Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of the Company's consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDAX as net income (loss) before depreciation, depletion and amortization, exploration and abandonment costs, net interest expense, income tax expense (benefit), change in Tax Receivable Agreement ("TRA") liability, stock-based compensation, acquisition costs, asset retirement obligation accretion expense, loss (gain) on sale of property, loss on early extinguishment of debt, inventory write down, loss (gain) on derivatives, net settlements on derivative instruments, net premium realization on options that settled during the period, and certain additional items.
Management believes Adjusted EBITDAX is useful because it allows the Company to more effectively evaluate its operating performance and compare the results of its operations from period to period without regard to its financing methods or capital structure. The Company excludes the items listed above from net income in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within its industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of the Company's operating performance. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX. The Company's computations of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies. The Company believes that Adjusted EBITDAX is useful to investors as a widely followed measure of operating performance.
The following table presents a reconciliation of Adjusted EBITDAX to the GAAP financial measure of net income (loss) for each of the periods indicated.
Parsley Energy, Inc. and Subsidiaries
Adjusted EBITDAX (1)
(Unaudited, in thousands)
Three Months Ended Year Ended
December 31, December 31,
2017 2016 2017 2016
---- ---- ---- ----
Adjusted EBITDAX reconciliation to net
income (loss):
Net income (loss)
attributable to
Parsley Energy, Inc.
stockholders $49,919 $(30,745) $106,774 $(74,182)
Net (loss) income
attributable to
noncontrolling
interests (4,922) (3,352) 17,146 (14,735)
Depreciation,
depletion and
amortization 105,143 62,653 352,247 233,766
Exploration and
abandonment costs 35,122 1,152 40,415 13,931
Interest expense, net 30,028 16,279 89,445 55,233
Income tax (benefit)
expense (19,830) 4,341 5,708 (17,424)
------- ----- ----- -------
EBITDAX 195,460 50,328 611,735 196,589
------- ------ ------- -------
Change in TRA
liability (56,396) (7,351) (35,847) (7,351)
Stock-based
compensation 4,989 3,405 19,619 12,871
Acquisition costs 8 155 10,977 1,081
Accretion of asset
retirement
obligations 374 157 971 732
Loss on sale of
property 14,332 - 14,332 119
Loss on early
extinguishment of
debt - 36,335 3,891 36,335
Inventory write down 1,060 - 1,060 -
Loss on derivatives 72,310 26,993 66,135 50,835
Net settlements on
derivative
instruments 16 1,881 15,670 26,441
Net premium
realization on
options that settled
during the period (14,699) 5,576 (37,103) 31,757
Adjusted EBITDAX $217,454 $117,479 $671,440 $349,409
======== ======== ======== ========
(1) Certain reclassifications to prior
period amounts have been made to
conform with current presentation.
Adjusted Net Income
Adjusted net income is not a measure of net income determined in accordance with GAAP. Adjusted net income is a supplemental non-GAAP performance measure used by management to evaluate financial performance, prior to non-cash gains or losses on derivatives, net cash received for derivative settlements, net premiums received on options that settled during the period, change in TRA liability, loss (gain) on sale of property, exploration and abandonment costs, acquisition costs, inventory write down, and loss on early extinguishment of debt while adjusting for noncontrolling interest and the associated changes in estimated income tax. Management believes adjusted net income is useful because it may enhance investors' ability to assess Parsley's historical and future financial performance. Adjusted net income should not be considered an alternative to, or more meaningful than, consolidated net income, operating income, or any other measure of financial performance presented in accordance with GAAP. The following table presents a reconciliation of the non-GAAP financial measure of adjusted net income to the GAAP financial measure of net loss.
Parsley Energy, Inc. and Subsidiaries
Adjusted Net Income and Net Income Per Share
(Unaudited, in thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
2017 2016 2017 2016
---- ---- ---- ----
Net income (loss) -as
reported $49,919 $(30,745) $106,774 $(74,182)
Adjustments:
Loss on derivatives 72,310 26,993 66,135 50,835
Net settlements on
derivative instruments 16 1,881 15,670 26,441
Net premium realization
on options that
settled during the
period (14,699) 5,576 (37,103) 31,757
Change in TRA liability (56,396) (7,351) (35,847) (7,351)
Loss on sale of
property 14,332 - 14,332 119
Exploration and
abandonment costs 35,122 1,152 40,415 13,931
Acquisition costs 8 155 10,977 1,081
Inventory write down 1,060 - 1,060 -
Loss on early
extinguishment of debt - 36,335 3,891 36,335
Noncontrolling interest (3,891) (3,310) 19,225 (14,953)
Change in estimated
income tax(1) (1,919) (18,884) (865) (47,152)
------
Adjusted net income $95,862 $11,802 $204,664 $16,861
======= ======= ======== =======
Net income (loss) per
diluted share -as
reported $0.16 $(0.17) $0.42 $(0.46)
Adjustments:
Loss on derivatives $0.23 $0.13 $0.22 $0.26
Net settlements on
derivative instruments - 0.01 0.05 0.14
Net premium realization
on options that
settled during the
period (0.05) 0.03 (0.13) 0.17
Change in TRA liability (0.18) (0.04) (0.12) (0.04)
Loss on sale of
property 0.05 - 0.05 -
Exploration and
abandonment costs 0.11 0.01 0.14 0.07
Acquisition costs - - 0.04 0.01
Inventory write down - - - -
Loss on early
extinguishment of debt - 0.18 0.01 0.19
Noncontrolling interest (0.01) (0.02) - (0.08)
Change in estimated
income tax(1) (0.01) (0.09) 0.01 (0.24)
Adjustment for change
in weighted average
diluted share count - 0.02 - 0.07
Adjusted net income per
diluted share $0.30 $0.06 $0.69 $0.09
===== ===== ===== =====
Basic weighted average
shares outstanding -
as reported 249,659 178,990 240,733 161,793
Effect of dilutive securities:
Class B Common Stock 63,946 - 54,665 -
Restricted Stock and
Restricted Stock Units 1,259 - 1,114 -
Diluted weighted
average shares
outstanding -as
reported(2) 314,864 178,990 296,512 161,793
======= ======= ======= =======
Effect of dilutive securities:
Class B Common Stock - 28,009 - 30,371
Restricted Stock and
Restricted Stock Units - 1,118 - 872
Diluted weighted
average shares
outstanding for
adjusted net income 314,864 208,117 296,512 193,036
======= ======= ======= =======
(1) The Company is subject to a
full valuation allowance for
federal income taxes as of
December 31, 2017, resulting
in minimal federal tax
expense; as a result, tax
expense is calculated based
on a 0.75% Texas margin tax
rate applied against certain
taxable items.
(2) For the three months and year
ended December 31, 2016 the
number of weighted average
diluted shares used to
calculate reported net
income per share is based on
the fact that, under the "if
converted" and treasury
stock methods, Class B
Common Stock and restricted
stock and restricted stock
units were not recognized
because they would have been
antidilutive.
PV-10
PV-10 is a non-GAAP financial measure and generally differs from the Standardized Measure, the most directly comparable GAAP financial measure, because it does not include the effects of income taxes on future net reserves. Neither PV-10 nor Standardized Measure represents an estimate of the fair market value of our oil and natural gas properties. We and others in the industry use PV-10 as a measure to compare the relative size and value of proved reserves held by companies without regard to the specific tax characteristics of such companies.
The following table provides a reconciliation of PV-10 to the GAAP financial measure of Standardized Measure as of December 31, 2017:
As of December 31, 2017
-----------------------
(in millions)
PV-10 of proved reserves $3,918.0
Present value of future income
tax discounted at 10% (902.5)
------
Standardized Measure $3,015.5
========
Supplemental Information
Derivatives
Parsley Energy, Inc. and Subsidiaries
Open Crude Oil Derivatives Positions (1)
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19
---- ---- ---- ---- ---- ---- ---- ----
Put Spreads (MBbls/d) (2) 7.8 11.5 34.2 37.5 11.7 11.5 8.2 8.2
Put Price ($/Bbl) $52.14 $52.50 $49.64 $49.67 $50.00 $50.00 $55.00 $55.00
Short Put Price ($/Bbl) $41.43 $42.50 $39.64 $39.67 $40.00 $40.00 $45.00 $45.00
Three Way Collars (MBbls/
d) (3) 43.3 49.5 31.0 31.0 8.3 8.2 8.2 8.2
Short Call Price ($/Bbl) $65.67 $68.11 $75.65 $75.65 $80.40 $80.40 $80.40 $80.40
Put Price ($/Bbl) $50.77 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00
Short Put Price ($/Bbl) $40.19 $40.00 $40.00 $40.00 $40.00 $40.00 $40.00 $40.00
Premium Realizations ($ MM)
(4) $(18.5) $(16.5) $(17.9) $(19.1) $(5.9) $(5.9) $(3.9) $(3.9)
Collars (MBbls/d) (5) 3.0 3.0 3.0
Short Call Price ($/Bbl) $61.31 $61.31 $61.31
Put Price ($/Bbl) $45.67 $45.67 $45.67
Total MBbls/d Hedged 51.1 64.0 68.2 71.5 20.0 19.7 16.4 16.4
Mid-Cuch Basis Swaps
(MBbls/d) 11.5 11.4 11.3 11.3
Swap Price ($/Bbl) $(0.86) $(0.86) $(0.86) $(0.86)
Parsley Energy, Inc. and Subsidiaries
Open Natural Gas Derivatives Positions (1)
1Q18 2Q18 3Q18 4Q18
---- ---- ---- ----
Three Way Collars
(MMBtu/d) (3) 35.0 8.2 8.2 8.2
Call Price ($/MMBtu) $4.44 $3.60 $3.60 $3.60
Put Price ($/MMBtu) $3.19 $3.00 $3.00 $3.00
Short Put Price
($/MMBtu) $2.64 $2.75 $2.75 $2.75
Swaps (MMBtu/d) 5.0
Strike Price
($/MMBtu) $3.50
Total MMBtu/d Hedged 40.0 8.2 8.2 8.2
Organic Reserves Replacement Ratio
Parsley uses the organic reserves replacement ratio as an indicator of the company's ability to replace the reserves that it has developed and to increase its reserves over time. The ratio is not a representation of value creation and has a number of limitations that should be considered. For example, the ratio does not incorporate the costs or timing of developing future reserves. The organic reserves replacement ratio of 683% was calculated as total 2017 reserve additions and revisions (technical and pricing), divided by total 2017 production. The ratio calculation excludes acquisitions and divestitures.
(1) As of 2/21/2018
(2) When NYMEX price
is above put
price, Parsley
receives the
NYMEX price. When
NYMEX price is
between the put
price and the
short put price,
Parsley receives
the put price.
When NYMEX price
is below the
short put price,
Parsley receives
the NYMEX price
plus the
difference
between the short
put price and the
put price.
(3) Functions
similarly to put
spreads except
that when index
price is at or
above the call
price, Parsley
receives the call
price.
(4) Premium
realizations
represent net
premiums paid
(including
deferred
premiums), which
are recognized as
a loss in the
period of
settlement.
(5) When NYMEX price
is above the call
price, Parsley
receives the call
price. When NYMEX
is below the put
price, Parsley
receives the put
price. When NYMEX
is between call
and put prices,
Parsley receives
the NYMEX price.
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SOURCE Parsley Energy, Inc.
