Parsley Energy Announces First Quarter 2019 Financial And Operating Results
AUSTIN, Texas, May 1, 2019 /PRNewswire/ -- Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today announced financial and operating results for the quarter ended March 31, 2019. The Company has posted a presentation to its website that supplements the information in this release.
First Quarter 2019 Highlights
-- Net oil production increased 2% quarter-over-quarter and 33%
year-over-year to 78.9 MBo per day. Total net production averaged 125.4
MBoe per day.
-- The Company registered favorable overall trends in operating costs
during the first quarter of 2019.
-- Both general and administrative expense ("G&A") per Boe and cash
based G&A per Boe((1)), which excludes stock-based compensation
expense, decreased quarter-over-quarter and year-over-year to $3.37
and $2.90, respectively, representing Company-record levels in each
case.
-- Parsley reported lease operating expense ("LOE") per Boe of $3.65,
up only 1% versus 4Q18 expense levels.
-- Parsley delivered encouraging operational results spread across the
Company's acreage footprint in the Delaware Basin, as detailed below.
-- The Company entered into an amendment to its revolving credit facility
on April 23, 2019, which increased its borrowing base from $2.3 billion
to $2.7 billion while maintaining an elected commitment amount of $1.0
billion.
Summary Comment and Outlook
"With our 2019 development plan, we set a course that prioritized a progression to sustainable free cash flow generation and an improvement in capital efficiency in a $50 oil world. Parsley Energy is on track to deliver on this action plan," said Matt Gallagher, Parsley's President and CEO. "The recent rise in oil prices provides an opportunity to compress our timeline to self-funded growth, but does not alter the Company's activity plans or returns-focused mindset."
Operational Update
Parsley delivered healthy execution across multiple disciplines during the first quarter of 2019, highlighted by efficient development operations.
Notable Well Results
Parsley turned nine wells to production in the Delaware Basin during 1Q19, comprised of four pads spread across the Company's acreage footprint in Pecos and Reeves Counties. Early results from these two-mile lateral wells are consistently strong, with all nine wells registering peak 24-hour oil rates over 1,400 Bo per day. This well set includes the Trees State 51-54 pad, which represents the eastern-most wells Parsley has completed in Pecos County to date. Early results from these two wells targeting the Lower Wolfcamp A zone are encouraging, with average peak 24-hour rates of 2,238 Boe per day (88% oil) and recent oil production averaging 1,750 Bo/d after more than 30 days online. The wells have not reached anticipated peak 30-day rates.
Cost control remains a key priority for Parsley in the Delaware Basin. On this front, Parsley delivered a meaningful improvement in drilling and completion efficiency versus 2017-2018 averages, translating to faster cycle times and lower equipment rental costs. The Company also recorded promising results from its first completion utilizing local sand, a design change that resulted in savings of over $0.5 million per well. The Company has additional local sand tests planned in the Delaware Basin later this year.
"I am encouraged by the positive recent developments in our Delaware Basin assets," said David Dell'Osso, Parsley's COO. "Furthermore, our sizable mineral ownership in this area helps amplify any capital efficiency improvements we are able to capture. Overall, our teams continue to build on the operational momentum they generated during 2018."
Activity Overview
During the first quarter of 2019, the Company spud 35 and placed on production 34 gross operated horizontal wells. Parsley's working interest on wells placed on production was approximately 93%, with an average completed lateral length of approximately 10,100 feet. Completion activity was weighted toward the Midland Basin, where the Company placed on production 25 gross operated horizontal wells, with the remainder placed on production in the Delaware Basin. Parsley expects that development activity will be more heavily weighted to the Midland Basin for the remainder of the year, consistent with prior commentary.
As part of the Company's ongoing focus to bolster operational efficiency, Parsley high-graded its rig fleet and dropped two rigs in aggregate during 1Q19. Parsley expects to maintain an activity level of 12 development rigs and three-to-four frac spreads through the end of 2019, as the Company intends to continue to operate in conformity with full-year capital spending expectations.
Financial Update
Healthy execution in 1Q19 translated to strong performance in key financial measures.
Profitability
During 1Q19, the Company recorded net loss attributable to its stockholders of $24.1 million, or $0.09 per share. Excluding, on a tax-adjusted basis, certain items that the Company does not view as indicative of its ongoing financial performance, adjusted net income for 1Q19 was $62.3 million, or $0.22 per share.((1))
Adjusted earnings before interest, income taxes, depreciation, depletion, amortization, and exploration expense ("Adjusted EBITDAX") for 1Q19 was $301.1 million.((1))
Realized Pricing
During 1Q19, Parsley reported an average unhedged oil price realization of $51.83/Bbl net of transportation costs, representing a discount of $3.07 to the average WTI Cushing price((2)) for the quarter.
Operating Costs
Parsley registered favorable overall trends in operating costs and margins during the first quarter of 2019. Both G&A per Boe and cash based G&A per Boe((1)), which excludes stock-based compensation expense, decreased quarter-over-quarter and year-over-year to $3.37 and $2.90, respectively, representing Company-record levels in each case. Encouraging G&A cost trends are a function of ongoing corporate cost savings initiatives, including an eight percent reduction to our total employee count since year-end 2018.
Healthy realized oil pricing and favorable trends in the aforementioned cash operating costs drove a strong operating cash margin of $28.07 per Boe, or 74% of the Company's average realized price per Boe.((1))
The Company reported LOE per Boe of $3.65, up only 1% versus 4Q18 expense levels. Stable LOE costs were driven by the Company's cost-effective water management system and lower than anticipated workover activity.
Capital Expenditures
Parsley reported capital expenditures of $406 million during the first quarter of 2019, comprised of $335 million for operated drilling and completion activity, $63 million for operated facilities and infrastructure, and $8 million associated with non-operated development activity.
Liquidity and Hedging
The Company entered into an amendment to its revolving credit facility on April 23, 2019, which increased its borrowing base from $2.3 billion to $2.7 billion while maintaining an elected commitment amount of $1.0 billion. As of March 31, 2019, Parsley had approximately $1.0 billion of liquidity, consisting of $10 million of cash and cash equivalents and an undrawn amount of $991 million on the Company's revolver.((3))
After recent additions to its hedge positions, a significant majority of Parsley's expected 2019 oil production is subject to hedge protection. The Company also recently added to its 2020 hedge positions. Parsley's portfolio of option contracts provides significant protection for its balance sheet and anticipated cash flow while retaining meaningful exposure to higher commodity prices. The Company has also entered into various basis swaps to protect against expansion of regional oil and gas price differentials. For details on Parsley's hedge position, please see the tables below under Supplemental Information and/or, upon availability, the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2019.
2019 Guidance
Parsley reiterates its 2019 annual guidance outlined in February. The Company expects second quarter 2019 net oil production to average 81-85 MBo/d. For further detail, please see the tables below.
2019E
Production
---
Annual net oil production (MBo/
d)
80.0-85.0
Annual net total production
(MBoe/d)
124.0-134.0
Capital Program
---
Total development expenditures
($MM)
$1,350-$1,550
Drilling and completion (% of
total) ~85%
Facilities, Infrastructure &
Other (% of total) ~15%
Activity
---
Gross operated horizontal
POPs(4)
130-140
Midland Basin (% of total) ~85%
Delaware Basin (% of total) ~15%
Average lateral length
10,000'-10,500'
Gross operated lateral footage
(000's)
1,350'-1,470'
Average working interest ~90%
Unit Costs
---
Lease operating expenses ($/Boe)
$3.50-$4.50
Cash general and administrative
expenses ($/Boe)
$2.75-$3.25
Production and ad valorem taxes
(% of total revenue) 6%-7%
Conference Call Information
Parsley Energy will host a conference call and webcast to discuss its results for the first quarter of 2019 on Thursday, May 2 at 9:00 a.m. Eastern Time (8:00 a.m. Central Time). Participants should call 877-709-8150 (United States/Canada) or 201-689-8354 (International) 10 minutes before the scheduled time and request the Parsley Energy earnings conference call. A telephone replay will be available through May 9 by dialing 877-660-6853 (United States/Canada) or 201-612-7415 (International). Conference ID: 13689547. A live broadcast will also be available on the internet at www.parsleyenergy.com under the "Investors-Events & Presentations" section of the website. The Company has also posted a presentation to its website that supplements the information in this release.
Upcoming Conference Participation
Parsley plans to participate in Tudor, Pickering, Holt & Co.'s 15th Annual Hotter 'N Hell conference in Houston, Texas on May 14 and the UBS Global Oil and Gas Conference in Austin, Texas on May 21-22.
About Parsley Energy, Inc.
Parsley Energy, Inc. is an independent oil and natural gas company focused on the acquisition, development, exploration, and production of unconventional oil and natural gas properties in the Permian Basin. 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.
- Tables to Follow -
(1) "Cash based
G&A per Boe",
"Adjusted
EBITDAX",
"operating
cash margin",
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,
operating
cash margin,
and adjusted
net income to
GAAP
financial
measures,
please see
the tables
and
associated
commentary
below under
Reconciliation
of Non-GAAP
Financial
Measures.
(2) Represents
Bloomberg-
sourced 1Q19
average WTI
Cushing
price.
(3) Fully undrawn
revolver
balance is
net of
letters of
credit.
(4) Wells placed
on
production.
Parsley Energy, Inc. and Subsidiaries
Selected Operating Data
(Unaudited)
Three Months Ended
March 31, 2019 December 31, 2018 March 31, 2018
---
Net production volumes:
Oil (MBbls) 7,102 7,087 5,341
Natural gas (MMcf) 10,488 9,696 8,556
Natural gas liquids
(MBbls) 2,436 2,323 1,643
Total (MBoe) 11,286 11,026 8,410
Average daily net
production (Boe/d) 125,400 119,848 93,444
Average sales prices
(1) :
Oil, without realized
derivatives (per Bbl) $
51.83 $
54.22 $
61.99
Oil, with realized
derivatives (per Bbl) $
49.40 $
52.69 $
58.32
Natural gas, without
realized derivatives
(per Mcf) $
1.38 $
0.90 $
2.04
Natural gas, with
realized derivatives
(per Mcf) $
1.33 $
0.94 $
2.06
NGLs (per Bbl) $
17.97 $
25.00 $
24.72
Average price per Boe,
without realized
derivatives $
37.78 $
40.91 $
46.27
Average price per Boe,
with realized
derivatives $
36.20 $
39.96 $
43.97
Average costs (per Boe):
Lease operating
expenses $
3.65 $
3.61 $
3.43
Transportation and
processing costs $
0.73 $
1.03 $
0.75
Production and ad
valorem taxes $
2.43 $
2.38 $
2.88
Depreciation, depletion
and amortization $
15.39 $
14.58 $
14.41
General and
administrative
expenses (including
stock-based
compensation) $
3.37 $
3.85 $
4.16
General and
administrative
expenses (cash based) $
2.90 $
3.42 $
3.56
(1) Average prices
shown in the
table reflect
prices both
before and
after the
effects of
the Company's
realized
commodity
hedging
transactions.
The Company's
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.
Parsley Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except for per share data)(1)
Three Months Ended March 31,
2019 2018
---
REVENUES
Oil sales $
368,126 $
331,103
Natural gas sales 14,452 17,424
Natural gas liquids sales 43,785 40,620
Other 1,308 3,594
Total revenues 427,671 392,741
OPERATING EXPENSES
Lease operating expenses 41,172 28,832
Transportation and processing costs 8,257 6,267
Production and ad valorem taxes 27,407 24,186
Depreciation, depletion and
amortization 173,723 121,199
General and administrative expenses
(including stock-based
compensation) 38,037 34,995
Exploration and abandonment costs 22,994 5,411
Acquisition costs - 4
Accretion of asset retirement
obligations 345 354
Loss on sale of property - 111
Other operating (income) expenses (811) 2,175
Total operating expenses 311,124 223,534
OPERATING INCOME 116,547 169,207
OTHER INCOME (EXPENSE)
Interest expense, net (33,002) (31,968)
Loss on derivatives (119,687) (10,793)
Change in TRA liability - (82)
Interest income 291 2,123
Other income 58 301
Total other expense, net (152,340) (40,419)
(LOSS) INCOME BEFORE INCOME TAXES (35,793) 128,788
INCOME TAX BENEFIT (EXPENSE) 7,790 (23,325)
NET (LOSS) INCOME (28,003) 105,463
LESS: NET LOSS (INCOME)
ATTRIBUTABLE TO NONCONTROLLING
INTERESTS 3,939 (22,573)
NET (LOSS) INCOME ATTRIBUTABLE TO
PARSLEY ENERGY, INC. STOCKHOLDERS $
(24,064) $
82,890
Net (loss) income per common share:
Basic $
(0.09) $
0.32
Diluted $
(0.09) $
0.32
Weighted average common shares outstanding:
Basic 278,794 260,654
Diluted 278,794 261,639
(1) Certain
reclassifications
and
adjustments to
prior period
amounts have
been made to
conform with
current
presentation.
Parsley Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
March 31, 2019 December 31, 2018
---
ASSETS
CURRENT ASSETS
Cash and cash equivalents $
10,380 $
163,216
Accounts receivable, net of allowance for doubtful accounts:
Joint interest owners and other 36,657 36,062
Oil, natural gas and NGLs 176,381 138,987
Related parties 2,204 94
Short-term derivative instruments, net 82,327 191,297
Other current assets 9,618 11,056
Total current assets 317,567 540,712
PROPERTY, PLANT AND EQUIPMENT
Oil and natural gas properties, successful
efforts method 10,327,178 9,948,246
Accumulated depreciation, depletion and
impairment (1,464,040) (1,295,098)
Total oil and natural gas properties, net 8,863,138 8,653,148
Other property, plant and equipment, net 178,854 170,739
Total property, plant and equipment, net 9,041,992 8,823,887
NONCURRENT ASSETS
Operating lease assets, net of accumulated
depreciation 157,655
Long-term derivative instruments, net 27,301 20,124
Other noncurrent assets 9,632 6,640
Total noncurrent assets 194,588 26,764
TOTAL ASSETS $
9,554,147 $
9,391,363
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $
402,496 $
364,803
Revenue and severance taxes payable 126,339 127,265
Short-term derivative instruments, net 138,784 152,330
Current operating lease liabilities 69,104
Other current liabilities 4,657 4,547
Total current liabilities 741,380 648,945
NONCURRENT LIABILITIES
Long-term debt 2,180,616 2,181,667
Deferred tax liability 121,336 131,523
Operating lease liability 92,793
Payable pursuant to tax receivable
agreement 71,077 68,110
Long-term derivative instruments, net 29,212 16,633
Asset retirement obligations 25,315 24,750
Financing lease liability 1,847
Total noncurrent liabilities 2,522,196 2,422,683
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, 281,525,513 shares
issued and 280,567,240 shares outstanding
at March 31, 2019 and 280,827,038 shares
issued and 280,205,293 shares outstanding
at December 31, 2018 2,815 2,808
Class B, $0.01 par value, 125,000,000
shares authorized, 36,127,731 and
36,547,731 shares issued and outstanding
at
March 31, 2019 and December
31, 2018 362 366
Additional paid in capital 5,175,012 5,163,987
Retained earnings 388,582 412,646
Treasury stock, at cost, 958,273 shares and
621,745 shares at March 31, 2019 and
December 31, 2018 (17,058) (11,749)
Total stockholders' equity 5,549,713 5,568,058
Noncontrolling interest 740,858 751,677
Total equity 6,290,571 6,319,735
TOTAL LIABILITIES AND EQUITY $
9,554,147 $
9,391,363
Parsley Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Three Months Ended March 31,
2019 2018
---
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $
(28,003) $
105,463
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and
amortization 173,723 121,199
Leasehold abandonments and
impairments 22,189 5,179
Accretion of asset retirement
obligations 345 354
Loss on sale of property - 111
Stock-based compensation 5,322 5,069
Deferred income tax (benefit)
expense (7,790) 23,325
Change in TRA liability - 82
Loss on derivatives 119,687 10,793
Net cash paid for derivative
settlements (5,072) (1,903)
Net cash paid for option
premiums (10,440) (13,506)
Other 1,056 1,096
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (37,989) (43,214)
Accounts receivable-related
parties (2,110) 77
Other current assets 1,438 3,835
Other noncurrent assets (3,308) (635)
Accounts payable and accrued
expenses (15,063) (5,427)
Revenue and severance taxes
payable (926) 15,057
Net cash provided by operating
activities 213,059 226,955
CASH FLOWS FROM INVESTING ACTIVITIES:
Development of oil and natural
gas properties (352,650) (411,073)
Acquisitions of oil and
natural gas properties (13,846) (27,447)
Additions to other property
and equipment (11,106) (28,248)
Proceeds from sales of
property, plant and equipment 17,486 43,228
Other 809 349
Net cash used in investing
activities (359,307) (423,191)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term
debt 120,000
Payments on long-term debt (120,000) (694)
Payments on financing lease
obligations (676)
Debt issuance costs - (32)
Repurchase of common stock (5,309) (6,465)
Distributions to owners from
consolidated subsidiary (603)
Net cash used in financing
activities (6,588) (7,191)
Net decrease in cash, cash
equivalents and restricted
cash (152,836) (203,427)
Cash, cash equivalents and
restricted cash at beginning
of period 163,216 554,189
Cash, cash equivalents and
restricted cash at end of
period $
10,380 $
350,762
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $
(30,493) $
(29,455)
Cash received for income taxes $
240
$
SUPPLEMENTAL DISCLOSURE OF NON-CASH
ACTIVITIES:
Asset retirement obligations
incurred, including changes
in estimate $
219 $
359
Additions to oil and natural
gas properties -change in
capital accruals $
53,654 $
13,013
Net premiums on options that
settled during the period $
(9,516) $
(16,526)
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 the Company's 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 (loss) income before depreciation, depletion and amortization, exploration and abandonment costs, net interest expense, interest income, income tax (benefit) expense, change in Tax Receivable Agreement ("TRA") liability, stock-based compensation, acquisition costs, loss on sale of property, accretion of asset retirement obligations, inventory write down, loss on derivatives, net settlements on derivative instruments and net premiums 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 measures 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,
2019 2018
---
Adjusted EBITDAX reconciliation to net
income:
Net (loss) income
attributable to
Parsley Energy, Inc.
stockholders $
(24,064) $
82,890
Net (loss) income
attributable to
noncontrolling
interests (3,939) 22,573
Depreciation,
depletion and
amortization 173,723 121,199
Exploration and
abandonment costs 22,994 5,411
Interest expense, net 33,002 31,968
Interest income (291) (2,123)
Income tax (benefit)
expense (7,790) 23,325
EBITDAX 193,635 285,243
Change in TRA
liability - 82
Stock-based
compensation 5,322 5,069
Acquisition costs - 4
Loss on sale of
property - 111
Accretion of asset
retirement
obligations 345 354
Inventory write down - 61
Loss on derivatives 119,687 10,793
Net settlements on
derivative
instruments (8,339) (2,873)
Net premiums on
options that settled
during the period (9,516) (16,526)
Adjusted EBITDAX $
301,134 $
282,318
(1) Certain
reclassifications
to prior
period amounts
have been made
to conform
with current
presentation.
Operating Cash Margin
Operating cash margin is not a measure of operating income as determined by GAAP. Operating cash margin is a supplemental non-GAAP performance measure used by the Company as an indicator of the Company's profitability and ability to manage its operating income. The Company defines operating cash margin as net (loss) income before income tax (benefit) expense, other revenues, depreciation, depletion and amortization, exploration and abandonment costs, stock-based compensation, acquisition costs, accretion of asset retirement obligations, other operating (income) expense, net interest expense, loss on sale of property, derivative loss, change in TRA liability, interest income, and other income. The amounts included in the calculations of operating cash margin were computed in accordance with GAAP.
Operating cash margin is provided in addition to, and not as an alternative for, and should be read in conjunction with, the information contained in the Company's condensed consolidated financial statements prepared in accordance with GAAP (including the notes), included in its SEC filings and posted on its website. The following table provides a reconciliation of operating cash margin to net income attributable to Parsley Energy, Inc. stockholders.
Parsley Energy, Inc. and Subsidiaries
Operating Cash Margin
(Unaudited, in thousands, except for per unit data)(1)
Three Months Ended March 31,
2019 2018
---
Net (loss) income
attributable to
Parsley Energy,
Inc. stockholders $
(24,064) $
82,890
Net (loss) income
attributable to
noncontrolling
interests (3,939) 22,573
Income tax (benefit)
expense (7,790) 23,325
Other revenues (1,308) (3,594)
Depreciation,
depletion and
amortization 173,723 121,199
Exploration and
abandonment costs 22,994 5,411
Stock-based
compensation 5,322 5,069
Acquisition costs - 4
Accretion of asset
retirement
obligations 345 354
Other operating
(income) expense (811) 2,175
Interest expense,
net 33,002 31,968
Loss on sale of
property - 111
Derivative loss 119,687 10,793
Change in TRA
liability - 82
Interest income (291) (2,123)
Other income (58) (301)
Operating cash
margin $
316,812 $
299,936
Operating cash
margin per Boe $
28.07 $
35.66
Average price per
Boe, without
realized
derivatives $
37.78 $
46.27
Operating cash
margin percentage 74
% 77
%
(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 the Company's management to evaluate financial performance, prior to (gains) losses on derivatives, net settlements on derivative instruments, net premiums received on options that settled during the period, loss on sale of property, exploration and abandonment costs, acquisition costs, 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)(1)
Three Months Ended March 31,
2019 2018
---
Net (loss) income -as
reported $
(24,064) $
82,890
Adjustments:
Loss on derivatives 119,687 10,793
Net settlements on
derivative
instruments (8,339) (2,873)
Net premiums on
options that settled
during the period (9,516) (16,526)
Loss on sale of
property - 111
Exploration and
abandonment costs 22,994 5,411
Acquisition costs - 4
Change in TRA
liability - 82
Change in
noncontrolling
interest (14,321) 647
Change in estimated
income tax (24,132) 522
Adjusted net income $
62,309 $
81,061
Net (loss) income per
diluted share -as
reported(2) $
(0.09) $
0.32
Adjustments:
Loss on derivatives $
0.42 $
0.04
Net settlements on
derivative
instruments (0.02) (0.01)
Net premiums on
options that settled
during the period (0.03) (0.06)
Loss on sale of
property -
Exploration and
abandonment costs 0.08 0.02
Change in
noncontrolling
interest (0.05)
Change in estimated
income tax (0.09)
Adjusted net income
per diluted share(3) $
0.22 $
0.31
Basic weighted average
shares outstanding -
as reported(2) 278,794 260,654
Effect of dilutive securities:
Restricted Stock and
Restricted Stock
Units - 985
Diluted weighted
average shares
outstanding -as
reported(2) 278,794 261,639
Effect of dilutive securities:
Restricted Stock and
Restricted Stock
Units 369
Diluted weighted
average shares
outstanding for
adjusted net
income(3) 279,163 261,639
(1) Certain
reclassifications
to prior
period amounts
have been made
to conform
with current
presentation.
(2) For the three
months ended
March 31, 2019
and 2018, 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"
method, Class
B Common Stock
was not
recognized
because it
would have
been
antidilutive.
(3) For purposes of
calculating
adjusted net
income per
diluted share
for the three
months ended
March 31, 2019
and 2018,
Class B Common
Stock was not
recognized
because the
shares would
have been
antidilutive
using the "if
converted"
method.
Open Derivatives Positions
Parsley Energy, Inc. and Subsidiaries
Open Crude Oil Derivatives Positions(1)
2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
---
OPTION CONTRACTS:
---
CUSHING
Put Spreads -Cushing
(MBbls/d)(2) 11.5 19.6 19.6
Long Put Price ($/Bbl) $
51.43 $
59.79 $
59.79
Short Put Price
($/Bbl) $
44.29 $
49.79 $
49.79
Three Way Collars -
Cushing (MBbls/d)(3) 21.4 26.1 26.1
Short Call Price
($/Bbl) $
70.89 $
72.69 $
72.69
Long Put Price ($/Bbl) $
48.85 $
51.88 $
51.88
Short Put Price
($/Bbl) $
41.15 $
42.81 $
42.81
Collars -Cushing
(MBbls/d)(4) 24.7 21.2 21.2
Short Call Price
($/Bbl) $
57.67 $
58.26 $
58.37
Long Put Price ($/Bbl) $
53.94 $
54.50 $
54.56
MIDLAND
Put Spreads -Midland
(MBbls/d)(2) 14.8 4.9 4.9
Long Put Price ($/Bbl) $
50.56 $
60.00 $
60.00
Short Put Price
($/Bbl) $
40.56 $
50.00 $
50.00
Three Way Collars -Midland (MBbls/
d)(3) 4.9 4.9 6.7 6.6
Short Call Price ($/Bbl) $
64.65 $
64.65 $
77.50 $
77.50
Long Put Price ($/Bbl) $
50.00 $
50.00 $
61.25 $
61.25
Short Put Price ($/Bbl) $
45.00 $
45.00 $
51.25 $
51.25
MAGELLAN EAST HOUSTON ("MEH")
Put Spreads -MEH
(MBbls/d)(2) 3.3 8.2 8.2 5.0 4.9
Long Put Price ($/Bbl) $
70.00 $
64.00 $
64.00 $
70.00 $
70.00
Short Put Price
($/Bbl) $
60.00 $
54.00 $
54.00 $
60.00 $
60.00
Three Way Collars -MEH (MBbls/d)(3) 31.7 31.3 11.4 11.4
Short Call Price ($/Bbl) $
76.53 $
76.53 $
80.00 $
80.00
Long Put Price ($/Bbl) $
60.13 $
60.13 $
61.07 $
61.07
Short Put Price ($/Bbl) $
50.14 $
50.14 $
51.07 $
51.07
Total Option Contracts
(MBbls/d) 75.7 84.9 84.9 43.4 42.8 11.4 11.4
Premium Realization
($MM)(5) $
(10.2) $
(14.5) $
(14.5) $
(9.9) $
(9.9) $
(2.9) $
(2.9)
BASIS SWAPS:
---
Midland-Cushing Basis
Swaps (MBbls/d)(6) 25.4 35.9 35.9 5.0 5.0
Basis Differential
($/Bbl) $
(5.10) $
(1.63) $
(0.78) $
0.25 $
0.25
MEH-Cushing Basis
Swaps (MBbls/d)(6) 2.1 2.1 2.1
Basis Differential
($/Bbl) $
5.10 $
5.10 $
5.10
Parsley Energy, Inc. and Subsidiaries
Open Natural Gas Derivatives Positions(1)
2Q19 3Q19 4Q19
---
OPTION CONTRACTS:
---
HENRY HUB
Three Way Collars
(MMBtu/d)(3) 32,967 32,609 32,609
Short Call Price
($/MMBtu) $
3.93 $
3.93 $
3.93
Long Put Price
($/MMBtu) $
3.00 $
3.00 $
3.00
Short Put Price
($/MMBtu) $
2.50 $
2.50 $
2.50
Total MMBtu/d Hedged 32,967 32,609 32,609
BASIS SWAPS:
---
Waha-Henry Hub Basis
Swaps (MMBtu/d)(6) 32,967 32,609 32,609
Basis Differential
($/MMBtu) $
(1.92) $
(1.78) $
(1.64)
(1) As of
5/1/2019.
Prices
represent
the weighted
average
price of
contracts
scheduled
for
settlement
during the
period.
(2) When the
reference
price (WTI,
Midland, or
MEH) is
above the
long put
price,
Parsley
receives the
reference
price. When
the
reference
price is
between the
long put
price and
the short
put price,
Parsley
receives the
long put
price. When
the
reference
price is
below the
short put
price,
Parsley
receives the
reference
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) When the
reference
price (WTI)
is above the
call price,
Parsley
receives the
call price.
When the
reference
price is
below the
long put
price,
Parsley
receives the
long put
price. When
the
reference
price is
between the
short call
and long put
prices,
Parsley
receives the
reference
price.
(5) Premium
realizations
represent
net premiums
paid
(including
deferred
premiums),
which are
recognized
as income or
loss in the
period of
settlement.
(6) Swaps that
fix the
basis
differentials
representing
the index
prices at
which the
Company
sells its
oil and gas
produced in
the Permian
Basin less
the WTI
Cushing
price and
Henry Hub
price,
respectively.
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SOURCE Parsley Energy, Inc.
