Parsley Energy Announces First Quarter 2018 Financial And Operating Results
Parsley Energy Announces First Quarter 2018 Financial And Operating Results
AUSTIN, Texas, May 3, 2018 /PRNewswire/ -- Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today announced financial and operating results for the quarter ended March 31, 2018. The Company has posted to its website a presentation that supplements the information in this release.
First Quarter 2018 Highlights
-- Net oil production increased 15% quarter-over-quarter and 57%
year-over-year to 59.3 MBo per day. Total net production averaged 93.4
MBoe per day.((1))
-- Parsley placed 21 gross operated horizontal wells on production in the
Delaware Basin during 1Q18 at an average completed lateral length of
approximately 9,600 feet, representing more lateral footage than the
Company completed in the Delaware Basin during all of 2017.
-- Parsley registered Company-record initial production rates for wells
completed in Glasscock and Pecos Counties, as detailed below.
-- The Company demonstrated strong cost control during the first quarter of
2018. Parsley reported lease operating expense ("LOE") per Boe of
$3.43,((1)) below the Company-provided guidance range for full-year
average LOE per Boe. Both general and administrative expense ("G&A") per
Boe and cash based G&A per Boe, which excludes stock-based compensation
expense, decreased quarter-over-quarter and year-over-year to $4.16((1))
and $3.56,((1)) respectively.
-- The Company amended its revolving credit agreement on April 30, 2018,
thereby increasing its borrowing base from $1.8 billion to $2.3 billion
while maintaining the Company's elected commitment amount of $1.0
billion.
"Parsley Energy made a confident first step toward executing our simplified 2018 development program," said Bryan Sheffield, Parsley's Chairman and CEO. "Accelerated development last year not only gave Parsley a head start on securing high quality services and equipment, the corresponding production uplift also means we are benefiting disproportionately from currently higher oil prices. While Parsley is well positioned to benefit from ongoing oil price strength, operational continuity at a steady development pace remains our highest priority this year."
Operational Update
Parsley's strong sequential production growth was driven by solid operational execution and favorable well productivity across its acreage footprint, highlighted by efficient Delaware Basin operations and a rapid return to full production following winter weather events in January. Volume growth was also supplemented by an increase in non-operated completion activity.
Activity Overview
During the first quarter, the Company spud 43 and placed on production 41 gross operated horizontal wells. Parsley's working interest on wells placed on production was approximately 97%, with an average completed lateral length of approximately 9,100 feet. Completion activity was nearly evenly distributed between the Midland Basin and the Delaware Basin, where the Company placed on production 20 and 21 gross operated horizontal wells, respectively. We expect that development activity will be weighted more to the Midland Basin for the remainder of the year, consistent with prior Company commentary.
Notable Well Results
With four rigs currently active in Glasscock County, recent well results in Glasscock bode well for the production contribution associated with this sizable portion of Parsley's development program. Among these results, the two-well Catfish Hunter 12-1 pad registered strong peak 30-day production rates of 2,022 Boe per day (69% oil) and 2,004 Boe per day (72% oil), respectively. Both wells targeted the Wolfcamp B interval and were completed with approximately two-mile laterals.
Parsley increased Delaware Basin oil production by more than 50% during 1Q18 as compared to 4Q17 through a combination of strong well results, cycle time improvement, and enhanced net revenue interests associated with mineral ownership on 18 of 21 wells placed on production during the quarter. Parsley's 1Q18 Delaware Basin activity included the three-well Trees State 31-34 pad in Pecos County targeting the Upper Wolfcamp A, Lower Wolfcamp A, and Wolfcamp B zones. Early results from this pad are outstanding, including two Company-record Delaware wells with respective peak 30-day production rates of 2,115 Boe per day (85% oil) and 1,940 Boe per day (86% oil) on approximately two-mile laterals. Notably, these wells are among the first to be completed in the southeast portion of Parsley's Pecos County acreage position. The 21 gross operated horizontal wells Parsley placed on production during 1Q18 represent more lateral footage than the Company completed in the Delaware Basin during all of 2017.
Non-Operated Activity
Non-operated development activity increased during the first quarter with 15 gross (6 net) horizontal wells placed on production, the timing of which was slightly ahead of Company forecasts. Non-operated activity for the remainder of 2018 is expected to be minimal.
Takeaway Positioning
During 1Q18, Parsley reported an unhedged oil price realization of $61.99/Bbl net of transportation costs, representing a differential of just $0.90/Bbl relative to the average NYMEX WTI price for the quarter.
By virtue of proactive steps taken to bolster the Company's firm transportation capacity and diversify its regional pricing exposure, Parsley now enjoys certain advantages with respect to its takeaway and marketing arrangements. Parsley currently has firm transport agreements covering 95,000 Bo per day of gross operated oil production. Additionally, the Company has diversified pricing agreements with large scale oil purchasers that price a portion of Parsley's barrels relative to Magellan East Houston, Cushing, and Midland benchmarks. During 2017, Parsley also layered on Midland-Cushing basis swaps that provide additional regional price protection during 2018.
"Our proactive marketing strategy has put us in a position of strength from both a flow assurance and realized pricing standpoint," said Matt Gallagher, Parsley's President and COO. "Given the interconnect flexibility, oil quality, scale, and growth visibility we can provide, our crude production is attractive to premier purchasers."
Financial Update
During 1Q18, the Company recorded net income attributable to its stockholders of $82.9 million, or $0.32 per share, compared to net income of $49.9 million, or $0.16 per share, during 4Q17. 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 1Q18 was $81.1 million, or $0.31 per share, compared to $95.9 million, or $0.30 per share, in 4Q17.((2))
Adjusted earnings before interest, income taxes, depreciation, depletion, amortization, and exploration expense ("Adjusted EBITDAX") for 1Q18 was $282.3 million, up 30% compared to the same measure in 4Q17.((2))
Parsley demonstrated strong cost control during the first quarter of 2018. The Company reported LOE per Boe of $3.43,((1)) below the Company-provided guidance range for full-year average LOE per Boe. Both G&A per Boe and cash based G&A per Boe, which excludes stock-based compensation expense, decreased quarter-over-quarter and year-over-year to $4.16((1)) and $3.56,((1)) respectively. Favorable trends in cash operating costs and strong realized pricing drove a robust operating cash margin of $35.65 per Boe, or 77% of average realized price per Boe.((3))
Parsley reported capital expenditures of $424 million during the quarter, comprised of $373 million for drilling and completion activity and $51 million for facilities and infrastructure, including saltwater disposal wells. In addition to spending associated with the above-mentioned 43 operated horizontal spuds and 41 operated horizontal wells placed on production, reported 1Q18 capital expenditures include $14 million of expenses associated with non-operated activity. With planned activity weighted more to the lower-cost Midland Basin for the remainder of 2018, we expect gross development costs per operated well to decrease from 1Q18 levels. We expect net development costs per operated well to decrease for the same reason, along with an expected reduction in average working interest.
Liquidity and Hedging
Parsley amended its revolving credit agreement on April 30, 2018, thereby increasing its borrowing base from $1.8 billion to $2.3 billion while maintaining the Company's elected commitment amount of $1.0 billion. As of March 31, 2018, Parsley had approximately $1.5 billion of liquidity, consisting of $500 million of cash, cash equivalents, and short-term investments, and an undrawn amount of $991 million on the Company's revolver.((4))
Almost all of Parsley's expected 2018 oil production is subject to hedge protection, and the Company recently added to its 2019 hedge position. Parsley's hedging strategy protects its balance sheet and anticipated cash flow while retaining significant exposure to higher commodity prices. For details on Parsley's hedging position, please see the tables below under Supplemental Information and/or the Company's Quarterly Report on Form 10-Q, upon availability, for the three months ended March 31, 2018.
Conference Call Information
Parsley Energy will host a conference call and webcast to discuss its results for the first quarter of 2018 on Friday, May 4 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 May 18 by dialing 877-660-6853 (United States/Canada) or 201-612-7415 (International). Conference ID: 13678639. A live broadcast will also be available on the internet at www.parsleyenergy.com under the "Events & Presentations" 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 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.
- Tables to Follow -
___________
(1) Natural gas and
natural gas
liquids
("NGLs") sales
and associated
production
volumes for
the three
months ended
March 31, 2018
reflect
adjustments
associated
with Parsley's
adoption of
Accounting
Standards
Codification
Topic 606,
Revenue from
Contracts with
Customers
("ASC 606"),
effective
January 1,
2018.
Accordingly,
all references
to 1Q18
production
volumes and
per Boe unit
costs likewise
reflect this
adoption,
which has the
effect of
increasing
certain
natural gas
and NGLs
volumes and
revenues,
offset by a
corresponding
transportation
and processing
cost such that
there is no
change to
reported net
income. The
recognition
and
presentation
of oil volumes
and associated
revenues and
expenses are
unaffected by
the adoption
of ASC 606.
Previously
provided full-
year guidance
for production
volumes and
unit costs
incorporated
the
anticipated
effect of the
adoption of
ASC 606.
For more
information on
ASC 606 and a
reconciliation
of 1Q18
production and
unit costs
under ASC 605
and as
adjusted under
ASC 606,
please see the
table and
associated
commentary
below under
Supplemental
Information
and/or the
Company's
Quarterly
Report on Form
10-Q, upon
availability,
for the three
months ended
March 31,
2018.
(2) "Adjusted
EBITDAX" and
"adjusted net
income" are
not presented
in accordance
with generally
accepted
accounting
principles in
the United
States
("GAAP"). For
definitions
and
reconciliations
of the non-
GAAP financial
measures of
adjusted
EBITDAX and
adjusted net
income to GAAP
financial
measures,
please see the
tables and
associated
commentary
below under
Reconciliation
of Non-GAAP
Financial
Measures.
(3) "Operating cash
margin" as
used in this
release
represents the
Company's
average sales
price (without
realized
derivatives)
per Boe less
lease
operating
expense per
Boe,
transportation
and processing
costs per Boe,
production and
ad valorem
taxes per Boe,
and cash based
general and
administrative
expense per
Boe (exclusive
of stock-
based
compensation),
each of which
reflects the
adoption of
ASC 606. Sales
price and cost
components
referenced in
the
calculation of
operating cash
margin can be
found in
"Selected
Operating
Data" in the
accompanying
financial
tables.
(4) Fully undrawn
revolver
balance is net
of letters of
credit.
Parsley Energy, Inc. and Subsidiaries
Selected Operating Data
(Unaudited)
Three Months Ended
March 31, 2018 December 31, 2017 March 31, 2017
-------------- ----------------- --------------
Net production volumes:
Oil (MBbls) 5,341 4,737 3,394
Natural gas (MMcf) (1) 8,556 7,221 4,419
Natural gas liquids
(MBbls) (1) 1,643 1,449 800
Total (MBoe) 8,410 7,390 4,931
Average daily net
production (Boe/d) 93,444 80,327 54,789
====== ====== ======
Average sales prices (2) :
Oil, without realized
derivatives (per Bbl) $61.99 $53.95 $50.01
Oil, with realized
derivatives (per Bbl) $58.32 $50.88 $48.52
Natural gas, without
realized derivatives
(per Mcf) $2.04 $2.15 $2.82
Natural gas, with
realized derivatives
(per Mcf) $2.06 $2.13 $2.80
NGLs (per Bbl) $24.72 $26.84 $21.77
Total, without realized
derivatives (per Boe) $46.27 $41.94 $40.48
Total, with realized
derivatives (per Boe) $43.97 $39.96 $39.44
====== ====== ======
Average costs (per Boe) (3):
Lease operating
expenses $3.43 $3.44 $3.57
Transportation and
processing costs $0.75 $ - $ -
Production and ad
valorem taxes $2.88 $3.01 $2.26
Depreciation, depletion
and amortization $14.41 $14.23 $13.99
General and
administrative
expenses (including
stock-based
compensation) $4.16 $4.72 $4.88
General and
administrative
expenses (cash based) $3.56 $4.04 $4.02
___________
(1) Natural gas
and NGLs
volumes for
the three
months ended
March 31,
2018 reflect
adjustments
associated
with
Parsley's
adoption of
ASC 606,
effective
January 1,
2018.
(2) Average prices
shown in the
table reflect
prices both
before and
after the
effects of
our realized
commodity
hedging
transactions.
Our
calculations
of such
effects
include both
realized
gains and
losses on
cash
settlements
for commodity
derivative
transactions
and premiums
paid or
received on
options that
settled
during the
period.
Realized oil
prices are
net of
transportation
costs.
Realized
prices for
certain gas
and NGLs
volumes are
net of
transportation,
gathering,
and
processing
costs as
stipulated by
ASC 606. For
more
information,
please see
associated
commentary
below under
Supplemental
Information
and/or the
Company's
Quarterly
Report on
Form 10-Q,
upon
availability,
for the three
months ended
March 31,
2018.
(3) Average costs
per Boe for
the three
months ended
March 31,
2018 reflect
adjustments
associated
with
Parsley's
adoption of
ASC 606,
effective
January 1,
2018.
Parsley Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except for per share data)(1)
Three Months Ended March 31,
2018 2017
---- ----
REVENUES
Oil sales $331,103 $169,745
Natural gas sales (2) 17,424 12,467
Natural gas liquids sales (2) 40,620 17,413
Other 3,594 1,233
----- -----
Total revenues 392,741 200,858
------- -------
OPERATING EXPENSES
Lease operating expenses 28,832 17,627
Transportation and processing costs
(2) 6,267 -
Production and ad valorem taxes 24,186 11,162
Depreciation, depletion and
amortization 121,199 68,970
General and administrative expenses
(including stock-based
compensation) 34,995 24,042
Exploration and abandonment costs 5,411 2,763
Acquisition costs 4 1,344
Accretion of asset retirement
obligations 354 136
Other operating expenses 2,175 2,283
Total operating expenses 223,423 128,327
OPERATING INCOME (LOSS) 169,318 72,531
------- ------
OTHER INCOME (EXPENSE)
Interest expense, net (31,968) (19,336)
Loss on sale of property (111) -
Loss on early extinguishment of
debt - (3,891)
(Loss) gain on derivatives (10,793) 24,616
Change in TRA liability (82) (20,549)
Interest income 2,123 2,371
Other income 301 950
--- ---
Total other expense, net (40,530) (15,839)
INCOME BEFORE INCOME TAXES 128,788 56,692
INCOME TAX EXPENSE (23,325) (18,402)
------- -------
NET INCOME 105,463 38,290
LESS: NET INCOME ATTRIBUTABLE TO
NONCONTROLLING INTERESTS (22,573) (8,848)
------- ------
NET INCOME ATTRIBUTABLE TO PARSLEY
ENERGY, INC. STOCKHOLDERS $82,890 $29,442
======= =======
Net income per common share:
Basic $0.32 $0.13
Diluted $0.32 $0.13
Weighted average common shares outstanding:
Basic 260,654 220,674
Diluted 261,639 221,697
___________
(1) Certain
reclassifications
and
adjustments to
prior period
amounts have
been made to
conform with
current
presentation.
(2) Natural gas and
NGLs sales and
transportation
and processing
costs for the
three months
ended March
31, 2018
reflect
adjustments
associated
with Parsley's
adoption of
ASC 606,
effective
January 1,
2018.
Parsley Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
March 31, 2018 December 31, 2017
-------------- -----------------
(In thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $350,762 $554,189
Short-term investments 149,345 149,283
Accounts receivable:
Joint interest owners and other 49,221 42,174
Oil, natural gas and NGLs 159,314 123,147
Related parties 311 388
Short-term derivative instruments, net 34,563 41,957
Assets held for sale - 1,790
Other current assets 6,530 6,558
----- -----
Total current assets 750,046 919,486
------- -------
PROPERTY, PLANT AND EQUIPMENT
Oil and natural gas properties, successful
efforts method 8,964,262 8,551,314
Accumulated depreciation, depletion and
impairment (938,629) (822,459)
-------- --------
Total oil and natural gas properties, net 8,025,633 7,728,855
--------- ---------
Other property, plant and equipment, net 131,691 106,587
------- -------
Total property, plant and equipment, net 8,157,324 7,835,442
--------- ---------
NONCURRENT ASSETS
Assets held for sale, net - 14,985
Long-term derivative instruments, net 25,150 15,732
Other noncurrent assets 8,128 7,553
----- -----
Total noncurrent assets 33,278 38,270
------ ------
TOTAL ASSETS $8,940,648 $8,793,198
========== ==========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $415,283 $407,698
Revenue and severance taxes payable 124,974 109,917
Current portion of long-term debt 2,388 2,352
Short-term derivative instruments, net 74,675 84,919
Current portion of asset retirement
obligations 7,308 7,203
----- -----
Total current liabilities 624,628 612,089
NONCURRENT LIABILITIES
Liabilities related to assets held for sale - 405
Long-term debt 2,179,996 2,179,525
Asset retirement obligations 20,476 19,967
Deferred tax liability 55,730 21,403
Payable pursuant to tax receivable
agreement 62,681 58,479
Long-term derivative instruments, net 27,487 20,624
Total noncurrent liabilities 2,346,370 2,300,403
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, 268,550,575 shares
issued and 268,112,160 shares outstanding
at March 31, 2018 and 252,419,601 shares
issued and 252,260,300 shares outstanding
at December 31, 2017 2,686 2,524
Class B, $0.01 par value, 125,000,000
shares authorized, 48,731,731 and
62,128,157 shares issued and outstanding
at March 31, 2018 and December 31, 2017 487 622
Additional paid in capital 4,911,682 4,666,365
Retained earnings 126,409 43,519
Treasury stock, at cost, 438,415 shares and
159,301 shares at March 31, 2018 and
December 31, 2017 (7,200) (735)
------ ----
Total stockholders' equity 5,034,064 4,712,295
Noncontrolling interest 935,586 1,168,411
------- ---------
Total equity 5,969,650 5,880,706
--------- ---------
TOTAL LIABILITIES AND EQUITY $8,940,648 $8,793,198
========== ==========
Parsley Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Three Months Ended March 31,
2018 2017
---- ----
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $105,463 $38,290
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and
amortization 121,199 68,970
Accretion of asset retirement
obligations 354 136
Loss on sale of property 111 -
Loss on early extinguishment
of debt - 3,891
Amortization and write off of
deferred loan origination
costs 1,189 783
Amortization of bond premium (129) (129)
Stock-based compensation 5,069 4,209
Deferred income tax expense 23,325 18,402
Change in TRA liability 82 20,549
Loss (gain) on derivatives 10,793 (24,616)
Net cash paid for derivative
settlements (1,903) (1,188)
Net cash paid for option
premiums (13,506) (16,291)
Net premiums paid on options
that settled during the
period (16,526) (4,854)
Other 5,215 118
Changes in operating assets and liabilities, net
of acquisitions:
Accounts receivable (43,214) (7,025)
Accounts receivable-related
parties 77 103
Other current assets 20,361 (85,460)
Other noncurrent assets (635) (902)
Accounts payable and accrued
expenses (5,427) 17,676
Revenue and severance taxes
payable 15,057 9,363
Net cash provided by operating
activities 226,955 42,025
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Development of oil and natural
gas properties (411,073) (161,003)
Acquisitions of oil and
natural gas properties (27,447) (589,286)
Additions to other property
and equipment (28,248) (10,628)
Proceeds from sales and
exchanges of oil and natural
gas properties 43,228 -
Other 349 -
Net cash used in investing
activities (423,191) (760,917)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term
debt - 451,500
Payments on long-term debt (694) (66,328)
Debt issuance costs (32) (6,280)
Proceeds from issuance of
common stock, net - 2,123,486
Repurchase of common stock (6,465) (112)
Net cash (used in) provided by
financing activities (7,191) 2,502,266
------ ---------
Net (decrease) increase in
cash, cash equivalents and
restricted cash (203,427) 1,783,374
Cash, cash equivalents and
restricted cash at beginning
of period 554,189 136,669
------- -------
Cash, cash equivalents and
restricted cash at end of
period $350,762 $1,920,043
======== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $29,455 $2,463
======= ======
Cash paid for income taxes $ - $200
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Asset retirement obligations
incurred, including changes
in estimate $359 $3,501
==== ======
Additions to oil and natural
gas properties -change in
capital accruals $13,013 $27,463
======= =======
Additions to other property
and equipment funded by
capital lease borrowings $491 $881
==== ====
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, (gain) loss on sale of property, asset retirement obligation accretion expense, loss on early extinguishment of debt, inventory write down, (gain) loss on derivatives, net settlements on derivative instruments, net premium realizations on options that settled during the period.
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 measure of other companies. The Company believes that Adjusted EBITDAX is a widely followed measure of operating performance.
The following table presents a reconciliation of Adjusted EBITDAX to the GAAP financial measure of net (loss) income for each of the periods indicated.
Parsley Energy, Inc. and Subsidiaries
Adjusted EBITDAX
(Unaudited, in thousands)(1)
Three Months Ended March 31,
2018 2017
---- ----
Adjusted EBITDAX
reconciliation to net
income:
Net income
attributable
to Parsley
Energy,
Inc.
stockholders $82,890 $29,442
Net income
attributable
to
noncontrolling
interests 22,573 8,848
Depreciation,
depletion
and
amortization 121,199 68,970
Exploration
and
abandonment
costs 5,411 2,763
Interest
expense,
net 29,845 16,965
Income tax
expense 23,325 18,402
------ ------
EBITDAX 285,243 145,390
------- -------
Change in
TRA
liability 82 20,549
Stock-
based
compensation 5,069 4,209
Acquisition
costs 4 1,344
Loss on
sale of
property 111 -
Accretion
of asset
retirement
obligations 354 136
Loss on
early
extinguishment
of debt - 3,891
Inventory
write down 61 -
Loss (gain)
on
derivatives 10,793 (24,616)
Net
settlements
on
derivative
instruments (2,873) (301)
Net premium
realization
on options
that
settled
during the
period (16,526) (4,854)
Adjusted
EBITDAX $282,318 $145,748
======== ========
___________
(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, (gain) loss on sale of property, exploration and abandonment costs, acquisition costs, loss on early extinguishment of debt, and change in TRA liability, 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 income (loss).
Parsley Energy, Inc. and Subsidiaries
Adjusted Net Income and Net Income Per Share
(Unaudited, in thousands, except per share data)
Three Months Ended March 31,
2018 2017
---- ----
Net income -
as reported $82,890 $29,442
Adjustments:
Loss (gain)
on
derivatives 10,793 (24,616)
Net
settlements
on
derivative
instruments (2,873) (301)
Net premium
realization
on options
that settled
during the
period (16,526) (4,854)
Loss on sale
of property 111 -
Exploration
and
abandonment
costs 5,411 2,763
Acquisition
costs 4 1,344
Loss on early
extinguishment
of debt - 3,891
Change in TRA
liability 82 20,549
Noncontrolling
interest 647 -
Change in
estimated
income tax 522 5,950
Adjusted net
income $81,061 $34,168
======= =======
Net income
per diluted
share -as
reported(1) $0.32 $0.13
Adjustments:
Loss (gain)
on
derivatives $0.04 $(0.11)
Net
settlements
on
derivative
instruments (0.01) -
Net premium
realization
on options
that settled
during the
period (0.06) (0.02)
Loss on sale
of property - -
Exploration
and
abandonment
costs 0.02 0.01
Acquisition
costs - 0.01
Loss on early
extinguishment
of debt - 0.01
Change in TRA
liability - 0.09
Noncontrolling
interest - -
Change in
estimated
income tax - 0.03
Adjusted net
income per
diluted
share(2) $0.31 $0.15
===== =====
Basic
weighted
average
shares
outstanding
-as
reported(1) 260,654 220,674
Effect of dilutive
securities:
Restricted
Stock and
Restricted
Stock Units 985 1,023
Diluted
weighted
average
shares
outstanding
-as
reported(1) 261,639 221,697
======= =======
Effect of dilutive
securities:
Class B
Common Stock - -
Restricted
Stock and
Restricted
Stock Units - -
Diluted
weighted
average
shares
outstanding
for adjusted
net
income(2) 261,639 221,697
======= =======
___________
(1) For the
three
months
ended
March 31,
2018 and
2017, the
number of
weighted
average
diluted
shares
used to
calculate
actual net
income per
share is
based on
the fact
that,
under the
"if
converted"
and
treasury
stock
methods,
Class B
Common
Stock was
not
recognized
because it
would have
been
antidilutive.
(2) For
purposes
of
calculating
adjusted
net income
per
diluted
share for
the three
months
ended
March 31,
2018 and
2017,
Class B
Common
Stock and
restricted
stock and
restricted
stock
units were
not
recognized
because
they would
have been
antidilutive
using the
treasury
stock
method.
Supplemental Information
Impact of ASC 606 Adoption
Parsley adopted ASC 606 effective January 1, 2018 using the modified retrospective approach. As a result, we changed our accounting policy for revenue recognition, which resulted in the following adjustments:
Three Months Ended March 31, 2018
ASC 605 Adjustment ASC 606
------- ---------- -------
Production revenues
(in thousands):
Oil sales $331,103 $ - $331,103
Natural gas sales 15,586 1,838 17,424
Natural gas liquids
sales 36,191 4,429 40,620
Total production
revenues 382,880 6,267 389,147
------- ----- -------
Operating expenses
Transportation and
processing costs - 6,267 6,267
-----
Production revenues
less transportation
and processing costs $382,880 $ - $382,880
======== === === ========
Net income
attributable to
Parsley, Inc.
stockholders (in
thousands) $82,890 $ - $82,890
Production:
Oil (MBbls) 5,341 - 5,341
Natural gas (MMcf) 7,982 574 8,556
Natural gas liquids
(MBbls) 1,464 179 1,643
Total (MBoe) 8,083 327 8,410
Average daily
production volume:
Oil (Bbls) 59,344 - 59,344
Natural gas (Mcf) 88,689 6,378 95,067
Natural gas liquids
(Bbls) 16,267 1,989 18,256
Total (Boe) 89,811 3,633 93,444
Certain unit costs
(per Boe):
Lease operating
expenses $3.57 $(0.14) $3.43
Transportation and
processing costs $ - $0.75 $0.75
Production and ad
valorem taxes $2.99 $(0.11) $2.88
Depreciation,
depletion and
amortization $14.99 $(0.58) $14.41
General and
administrative
expenses (including
stock-based
compensation) $4.33 $(0.17) $4.16
General and
administrative
expenses (cash based) $3.70 $(0.14) $3.56
Changes to natural gas and NGLs sales were made in accordance with the control model defined in ASC 606. Under the new control model, we are required to identify and separately analyze each contract associated with revenues to determine the appropriate accounting application.
As a result of this analysis, we modified our accounting and presentation of natural gas and NGLs sales, and transportation and processing costs under certain marketing agreements. For additional information related to our adoption of ASC 606, please refer to Note 2--Summary of Accounting Policies--Impact of ASC 606 Adoption in our consolidated financial statements contained in our Quarterly Report on Form 10-Q, upon availability, for the three months ended March 31, 2018.
Open Derivatives Positions
Parsley Energy, Inc. and Subsidiaries
Open Crude Oil Derivatives Positions (1)
2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19
---- ---- ---- ---- ---- ---- ----
Put Spreads
(MBbls/d) (2) 11.5 34.2 37.5 20.6 20.3 11.4 11.4
Long Put Price
($/Bbl) $52.50 $49.64 $49.67 $54.32 $54.32 $55.71 $55.71
Short Put Price
($/Bbl) $42.50 $39.64 $39.67 $44.32 $44.32 $45.71 $45.71
Three Way
Collars
(MBbls/d) (3) 49.5 31.0 31.0 8.3 8.2 9.8 9.8
Short Call
Price ($/Bbl) $68.11 $75.65 $75.65 $80.40 $80.40 $80.33 $80.33
Long Put Price
($/Bbl) $50.00 $50.00 $50.00 $50.00 $50.00 $50.83 $50.83
Short Put Price
($/Bbl) $40.00 $40.00 $40.00 $40.00 $40.00 $40.83 $40.83
Premium
Realization ($
MM) (4) $(16.5) $(17.9) $(19.1) $(8.4) $(8.4) $(5.5) $(5.5)
Collars (MBbls/
d) (5) 3.0 3.0 3.0
Short Call
Price ($/Bbl) $61.31 $61.31 $61.31
Long Put Price
($/Bbl) $45.67 $45.67 $45.67
Total MBbls/d
Hedged 64.0 68.2 71.5 28.9 28.6 21.2 21.2
Mid-Cush Basis
Swaps (MBbls/
d) (6) 11.4 11.3 11.3
Swap Price
($/Bbl) $(0.86) $(0.86) $(0.86)
Rollfactor
Swaps (MBbl/
d) (7) 15.0 15.0 15.0
Swap Price
($/Bbl) $0.60 $0.60 $0.60
Parsley Energy, Inc. and Subsidiaries
Open Natural Gas Derivatives Positions (1)
2Q18 3Q18 4Q18
---- ---- ----
Three Way
Collars
(MMBtu/d) (3) 8,152 8,152 8,152
Short Call
Price
($/MMBtu) $3.60 $3.60 $3.60
Long Put Price
($/MMBtu) $3.00 $3.00 $3.00
Short Put Price
($/MMBtu) $2.75 $2.75 $2.75
Total MMBtu/d
Hedged 8,152 8,152 8,152
_________
(1) As of
5/2/2018.
Prices
represent
the
weighted
average
price of
contracts
scheduled
for
settlement
during the
period.
(2) When the
NYMEX price
is above
the long
put price,
Parsley
receives
the NYMEX
price. When
the NYMEX
price is
between the
long put
price and
the short
put price,
Parsley
receives
the long
put price.
When the
NYMEX price
is below
the short
put price,
Parsley
receives
the NYMEX
price plus
the
difference
between the
short put
price and
the long
put price.
(3) Functions
similarly
to put
spreads
except that
when the
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 income
or loss in
the period
of
settlement.
(5) When the
NYMEX price
is above
the call
price,
Parsley
receives
the call
price. When
the NYMEX
price is
below the
long put
price,
Parsley
receives
the long
put price.
When the
NYMEX price
is between
the short
call and
long put
prices,
Parsley
receives
the NYMEX
price.
(6) Parsley
receives
the swap
price.
(7) These
positions
hedge the
timing risk
associated
with
Parsley's
physical
sales.
Parsley
generally
sells crude
oil for the
delivery
month at a
sales price
based on
the average
NYMEX price
during that
month, plus
an
adjustment
calculated
as a spread
between the
weighted
average
prices of
the
delivery
month, the
next month,
and the
following
month
during the
period when
the
delivery
month is
the first
month.
CONTACT: Brad Smith, Ph.D., CFA, Senior Vice President, Corporate Strategy and Investor Relations, ir@parsleyenergy.com, (512) 505-5199, or Kyle Rhodes, Director of Investor Relations, ir@parsleyenergy.com, (512) 505-5199
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SOURCE Parsley Energy, Inc.
