Parsley Energy Announces Second Quarter 2019 Financial And Operating Results; Tightens Capital Budget Range, Raises Production Guidance, And Lowers Unit Cost Estimates
AUSTIN, Texas, Aug. 6, 2019 /PRNewswire/ -- Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today announced financial and operating results for the quarter ended June 30, 2019. The Company has posted a presentation to its website that supplements the information in this release.
Second Quarter 2019 Highlights
-- Net oil production increased 10% quarter-over-quarter and 28%
year-over-year to 86.6 MBo per day. Total net production averaged 140.1
MBoe per day.
-- The Company registered favorable trends in operating costs during the
second quarter of 2019.
-- Parsley reported lease operating expense ("LOE") per Boe of $3.35,
representing a Company-record level and an 8% reduction versus 1Q19.
Parsley is lowering full-year 2019 LOE per Boe guidance from
$3.50-$4.50 to $3.40-$3.90.
-- 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 $2.74
and $2.35, respectively, representing Company-record levels in each
case. Parsley is lowering full-year 2019 cash G&A per Boe guidance
from $2.75-$3.25 to $2.60-$2.90.
-- Parsley is tightening its 2019 capital budget guidance from $1.35-$1.55
billion to $1.40-$1.49 billion.
-- The Company is increasing full-year 2019 net oil production guidance
from 80.0-85.0 MBo per day to 85.0-86.5 MBo per day. At the midpoint,
the updated range translates to estimated year-over-year organic growth
of nearly 25%.
Summary Comment and Outlook
"When we unveiled our 2019 development plan, we pointed to this year representing a critical next step in Parsley's corporate evolution. We set a course aiming to take a step forward to sustainable free cash flow, while delivering a step-change improvement in capital efficiency," said Matt Gallagher, Parsley's President and CEO. "I am proud of the strides we have made on our 2019 action plan and our updated guidance ranges reflect the high level of execution delivered across the organization. We are now positioned to generate free cash flow for the remainder of the year, which will cement a core tenet of our 2019 action plan. Furthermore, I am excited that Parsley Energy is now on a trajectory toward growing free cash flow, ultimately increasing visibility for the return of capital to shareholders."
Operational Update
Activity Overview
During the second quarter of 2019, the Company spud 41 and placed on production 39 gross operated horizontal wells. Parsley's working interest on wells placed on production was approximately 99%, with an average completed lateral length of approximately 9,750 feet. Completion activity was weighted toward the Midland Basin, where the Company placed on production 33 gross operated horizontal wells, with the remainder placed on production in the Delaware Basin. Parsley expects that development activity will remain weighted to the Midland Basin for the remainder of the year, consistent with prior commentary.
Parsley maintained operational momentum during the second quarter of 2019, including an 8% improvement in drilling efficiency((2) )compared to the first quarter of 2019. These drilling efficiency gains enabled the Company to drop from 12 development rigs to 11 development rigs in mid-June. Parsley expects to run a maximum of 11 development rigs and three-to-four frac spreads through the end of 2019. Parsley intends to proactively manage its schedule to adhere to its full-year capital budget expectations and preserve operational momentum into 2020.
"Our 2019 action plan sought to build upon operational efficiency gains captured during 2018. Our teams are delivering on this key objective, and we are now generating more footage with less equipment," said David Dell'Osso, Parsley's COO. "Importantly, this incremental footage coincides with a commitment to a narrowed capital budget range, translating to a more capital efficient program in 2019. Finally, Parsley is targeting a consistent capital investment pace through the end of the year as the Company expects to carry operational momentum into next year."
Notable Well Results
Parsley's returns-focused strategy targeted increased development activity in its Upton County area during 2019. Over the past six months, Upton County has been the Company's most active area with 25 wells turned to production. These recent wells included three wells on the Hanks Family lease, which were completed in the Wolfcamp B zone with an upsized proppant loading of approximately 2,400 pounds per lateral foot. Early results from these three 6,500' lateral wells are promising, with 30-day peak production rates averaging 1,342 Boe/d (74% oil). More broadly, the Company's 2019 Upton County wells are delivering encouraging early results in the aggregate, registering a higher oil productivity than comparable 2018 wells.
Financial Update
Healthy execution in 2Q19 translated to strong performance in key financial measures.
Profitability
During 2Q19, the Company recorded net income attributable to its stockholders of $115.9 million, or $0.41 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 2Q19 was $90.4 million, or $0.32 per share.((1))
Adjusted earnings before interest, income taxes, depreciation, depletion, amortization, and exploration expense ("Adjusted EBITDAX") for 2Q19 was $368.4 million.((1))
Realized Pricing
During 2Q19, Parsley reported an average unhedged oil price realization of $58.23/Bbl net of transportation costs, representing a discount of $1.68 to the average WTI Cushing price((3)) for the quarter.
Operating Costs
Parsley registered favorable trends in operating costs and margins during the second quarter of 2019. The Company reported LOE per Boe of $3.35, down 8% versus 1Q19 expense levels. Favorable LOE unit cost trends were driven by artificial lift optimization, continued utilization of the Company's integrated water handling system, and increased production volumes. Parsley is lowering full-year 2019 LOE per Boe guidance from $3.50-$4.50 to $3.40-$3.90.
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 $2.74 and $2.35, respectively, representing Company-record levels in each case. Encouraging G&A cost trends are a function of ongoing corporate cost savings initiatives, including a previously disclosed reduction in workforce. During 2Q19, Parsley incurred one-time restructuring and other termination costs of $1.6 million as part of its continuing effort to reduce future general and administrative expenses. These one-time costs are reported separately from the Company's G&A and cash based G&A. Parsley is lowering full-year 2019 cash G&A per Boe guidance from $2.75-$3.25 to $2.60-$2.90.
Healthy realized oil pricing and favorable trends in the aforementioned cash operating costs drove a strong operating cash margin of $30.38 per Boe, or 78% of the Company's average realized price per Boe.((1))
Capital Expenditures
Parsley reported capital expenditures of $372 million during the second quarter of 2019, comprised of $290 million for operated drilling and completion activity, $76 million for operated facilities and infrastructure, and $6 million associated with non-operated development activity.
Liquidity and Hedging
As of June 30, 2019, Parsley had approximately $1.0 billion of liquidity, consisting of $64 million of cash and cash equivalents and an availability of $951 million on the Company's revolver.((4))
A significant majority of Parsley's expected 2019 oil production remains subject to hedge protection. The Company also recently added to its 2020 hedge positions, including new Brent contracts that further align Parsley's hedge position with its regional price exposure. Parsley's portfolio of option contracts provides significant protection for its balance sheet and anticipated cash flow while retaining meaningful exposure to higher commodity prices. For details on Parsley's hedge position, please see the tables below under Supplemental Information and/or, upon availability, the Company's Quarterly Report on Form 10-Q for the three months ended June 30, 2019.
2019 Guidance
Parsley is tightening its 2019 capital budget range, increasing its full-year 2019 net oil production guidance and decreasing its full-year 2019 unit operating cost guidance, reflecting strong execution across the organization. The Company expects third quarter 2019 net oil production to average 87-90 MBo/d. For further detail, please see the table below.
Previous
Updated
2019 Guidance
2019 Guidance
Production
---
Annual net oil
production (MBo/d)
80.0-85.0
85.0-86.5
Annual net total
production (MBoe/d)
124.0-134.0
134.0-139.0
Capital Program
---
Total development
expenditures ($MM)
$1,350-$1,550
$1,400-$1,490
Drilling and completion
(% of total) ~85% ~85%
Facilities,
Infrastructure & Other
(% of total) ~15% ~15%
Activity
---
Gross operated
horizontal POPs(5)
130-140
135-140
Midland Basin (% of
total) ~85% ~85%
Delaware Basin (% of
total) ~15% ~15%
Average lateral length
10,000'-10,500'
10,100'-10,500'
Gross operated lateral
footage (000's)
1,350'-1,470'
1,365'-1,470'
Average working
interest ~90% 93%-94%
Unit Costs
---
Lease operating
expenses ($/Boe)
$3.50-$4.50
$3.40-$3.90
Cash general and
administrative
expenses ($/Boe)
$2.75-$3.25
$2.60-$2.90
Production and ad
valorem taxes (% of
total revenue) 6%-7% 6%-7%
Conference Call Information
Parsley Energy will host a conference call and webcast to discuss its results for the second quarter of 2019 on Wednesday, August 7 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 September 6 by dialing 877-660-6853 (United States/Canada) or 201-612-7415 (International). Conference ID: 13692133. 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 the Heikkinen Energy Conference in Houston, Texas on August 13-14 and the Barclays Global CEO-Energy Power Conference in New York, New York on September 3-5.
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) "Drilling
efficiency"
is measured
based on
drilled feet
per
operational
day.
"Operational
days" are
measured as
days
equipment is
active and do
not include
mobilization
or other idle
time.
(3) Represents
Bloomberg-
sourced 2Q19
average WTI
Cushing
price.
(4) Revolver
availability
is net of
letters of
credit.
(5) Wells placed
on
production.
Note As used in
this press
release, free
cash flow, a
non-GAAP
financial
measure, is
defined as
cash flow
from
operations
before
changes in
operating
assets and
liabilities
less accrual-
based
development
capital
expenditures.
Parsley Energy, Inc. and Subsidiaries
Selected Operating Data
(Unaudited)
Three Months Ended
June 30, 2019 March 31, 2019 June 30, 2018
---
Net production volumes:
Oil (MBbls) 7,881 7,102 6,165
Natural gas (MMcf) 13,004 10,488 9,235
Natural gas liquids
(MBbls) 2,701 2,436 2,106
Total (MBoe) 12,749 11,286 9,811
Average daily net
production (Boe/d) 140,099 125,400 107,813
Average sales prices
(1) :
Oil, without realized
derivatives (per Bbl) $
58.23 $
51.83 $
64.29
Oil, with realized
derivatives (per Bbl) $
55.42 $
49.40 $
60.11
Natural gas, without
realized derivatives
(per Mcf) $
0.01 $
1.38 $
1.32
Natural gas, with
realized derivatives
(per Mcf) $
0.28 $
1.33 $
1.40
NGLs (per Bbl) $
14.18 $
17.97 $
27.20
Average price per Boe,
without realized
derivatives $
39.01 $
37.78 $
47.48
Average price per Boe,
with realized
derivatives $
37.54 $
36.20 $
44.92
Average costs (per Boe):
Lease operating
expenses $
3.35 $
3.65 $
3.66
Transportation and
processing costs $
0.52 $
0.73 $
0.66
Production and ad
valorem taxes $
2.41 $
2.43 $
2.79
Depreciation, depletion
and amortization $
15.57 $
15.39 $
14.84
General and
administrative
expenses (including
stock-based
compensation) $
2.74 $
3.37 $
3.67
General and
administrative
expenses (cash based) $
2.35 $
2.90 $
3.12
(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 June 30, Six Months Ended June 30,
2019 2018 2019 2018
---
REVENUES
Oil sales $
458,888 $
396,325 $
827,014 $
727,428
Natural gas sales 141 12,235 14,593 29,659
Natural gas liquids sales 38,312 57,275 82,097 97,895
Other 1,200 1,953 2,508 5,547
Total revenues 498,541 467,788 926,212 860,529
OPERATING EXPENSES
Lease operating expenses 42,696 35,904 83,868 64,736
Transportation and processing costs 6,608 6,471 14,865 12,738
Production and ad valorem taxes 30,744 27,331 58,151 51,517
Depreciation, depletion and amortization 198,563 145,552 372,286 266,751
General and administrative expenses
(including stock-based compensation) 34,907 35,991 72,944 70,986
Exploration and abandonment costs 72 3,366 23,066 8,777
Acquisition costs - (2) 2
Accretion of asset retirement obligations 353 359 698 713
Gain on sale of property - (5,166) (5,055)
Restructuring and other termination costs 1,562 1,562
Other operating expenses 2,199 2,477 1,388 4,652
Total operating expenses 317,704 252,283 628,828 475,817
OPERATING INCOME 180,837 215,505 297,384 384,712
OTHER INCOME (EXPENSE)
Interest expense, net (33,597) (33,758) (66,599) (65,726)
Gain (loss) on derivatives 19,561 (9,466) (100,126) (20,259)
Change in TRA liability - (82)
Interest income 103 1,686 394 3,809
Other income 715 234 773 535
Total other expense, net (13,218) (41,304) (165,558) (81,723)
INCOME BEFORE INCOME TAXES 167,619 174,201 131,826 302,989
INCOME TAX EXPENSE (32,625) (33,243) (24,835) (56,568)
NET INCOME 134,994 140,958 106,991 246,421
LESS: NET INCOME ATTRIBUTABLE TO
NONCONTROLLING INTERESTS (19,059) (21,803) (15,120) (44,376)
NET INCOME ATTRIBUTABLE TO PARSLEY ENERGY,
INC. STOCKHOLDERS $
115,935 $
119,155 $
91,871 $
202,045
Net income per common share:
Basic $
0.41 $
0.44 $
0.33 $
0.76
Diluted $
0.41 $
0.44 $
0.33 $
0.76
Weighted average common shares outstanding:
Basic 279,706 272,239 279,253 266,479
Diluted 279,768 272,846 279,363 267,043
(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)
June 30, 2019 December 31, 2018
---
ASSETS
CURRENT ASSETS
Cash and cash equivalents $
64,099 $
163,216
Accounts receivable, net of allowance for doubtful accounts:
Joint interest owners and other 30,273 39,564
Oil, natural gas and NGLs 158,917 136,209
Related parties 892 94
Short-term derivative instruments, net 134,103 191,297
Other current assets 7,420 10,332
Total current assets 395,704 540,712
PROPERTY, PLANT AND EQUIPMENT
Oil and natural gas properties, successful
efforts method 10,675,629 9,948,246
Accumulated depreciation, depletion and
impairment (1,647,036) (1,295,098)
Total oil and natural gas properties, net 9,028,593 8,653,148
Other property, plant and equipment, net 188,144 170,739
Total property, plant and equipment, net 9,216,737 8,823,887
NONCURRENT ASSETS
Operating lease assets, net of accumulated
depreciation 179,066
Long-term derivative instruments, net 39,750 20,124
Other noncurrent assets 6,809 6,640
Total noncurrent assets 225,625 26,764
TOTAL ASSETS $
9,838,066 $
9,391,363
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $
423,145 $
364,803
Revenue and severance taxes payable 132,131 127,265
Short-term derivative instruments, net 150,427 152,330
Current operating lease liabilities 79,719
Other current liabilities 3,846 4,547
Total current liabilities 789,268 648,945
NONCURRENT LIABILITIES
Long-term debt 2,221,355 2,181,667
Deferred tax liability 156,159 131,523
Operating lease liability 102,479
Payable pursuant to tax receivable
agreement 71,077 68,110
Long-term derivative instruments, net 40,485 16,633
Asset retirement obligations 26,948 24,750
Financing lease liability 2,294
Total noncurrent liabilities 2,620,797 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, 282,134,006 shares
issued and 281,116,921 shares outstanding
at June 30, 2019 and 280,827,038 shares
issued and 280,205,293 shares outstanding
at December 31, 2018 2,821 2,808
Class B, $0.01 par value, 125,000,000
shares authorized, 35,538,145 and
36,547,731 shares issued and outstanding
at June 30, 2019 and December 31, 2018 356 366
Additional paid in capital 5,190,453 5,163,987
Retained earnings 504,517 412,646
Treasury stock, at cost, 1,017,085 shares
and 621,745 shares at June 30, 2019 and
December 31, 2018 (17,401) (11,749)
Total stockholders' equity 5,680,746 5,568,058
Noncontrolling interests 747,255 751,677
Total equity 6,428,001 6,319,735
TOTAL LIABILITIES AND EQUITY $
9,838,066 $
9,391,363
(1) Certain
reclassifications
and
adjustments to
prior period
amounts have
been made to
conform with
current
presentation.
Parsley Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Six Months Ended June 30,
2019 2018
---
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $
106,991 $
246,421
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and
amortization 372,286 266,751
Leasehold abandonments and
impairments 22,189 8,323
Accretion of asset retirement
obligations 698 713
Gain on sale of property - (5,055)
Stock-based compensation 10,298 10,432
Deferred income tax expense 24,835 56,568
Change in TRA liability - 82
Loss on derivatives 100,126 20,259
Net cash paid for derivative
settlements (15,111) (7,211)
Net cash paid for option
premiums (23,609) (26,330)
Other 1,623 2,001
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (13,417) (42,993)
Accounts receivable-related
parties (798) 147
Other current assets 7,245 (31,419)
Other noncurrent assets (805) (318)
Accounts payable and accrued
expenses 18,465 (32,213)
Revenue and severance taxes
payable 4,866 24,823
Net cash provided by operating
activities 615,882 490,981
CASH FLOWS FROM INVESTING ACTIVITIES:
Development of oil and natural
gas properties (737,194) (854,228)
Acquisitions of oil and
natural gas properties (24,591) (56,014)
Additions to other property
and equipment (27,911) (48,047)
Proceeds from sales of
property, plant and equipment 37,893 42,553
Maturity of short-term
investments - 49,627
Other 4,489 35,018
Net cash used in investing
activities (747,314) (831,091)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term
debt 352,000
Payments on long-term debt (312,000) (1,461)
Payments on financing lease
obligations (1,430)
Debt issuance costs - (45)
Repurchase of common stock (5,652) (10,871)
Distributions to owners from
consolidated subsidiary (603)
Net cash provided by (used in)
financing activities 32,315 (12,377)
Net decrease in cash, cash
equivalents and restricted
cash (99,117) (352,487)
Cash, cash equivalents and
restricted cash at beginning
of period 163,216 554,189
Cash, cash equivalents and
restricted cash at end of
period $
64,099 $
201,702
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $
(58,164) $
(64,047)
Cash received for income taxes $
240
$
SUPPLEMENTAL DISCLOSURE OF NON-CASH
ACTIVITIES:
Asset retirement obligations
incurred, including changes
in estimate $
1,208 $
940
Additions to oil and natural
gas properties -change in
capital accruals $
41,124 $
46,969
Net premiums on options that
settled during the period $
(19,748) $
(34,598)
(1) Certain
reclassifications
and
adjustments to
prior period
amounts have
been made to
conform with
current
presentation.
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 income before depreciation, depletion and amortization, exploration and abandonment costs, net interest expense, interest income, income tax expense, change in Tax Receivable Agreement ("TRA") liability, stock-based compensation, acquisition costs, gain on sale of property, restructuring and other termination costs, accretion of asset retirement obligations, inventory write down, (gain) 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 income attributable to Parsley Energy, Inc. stockholders for each of the periods indicated.
Parsley Energy, Inc. and Subsidiaries
Adjusted EBITDAX
(Unaudited, in thousands)(1)
Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
---
Adjusted EBITDAX reconciliation to net
income:
Net income
attributable to
Parsley Energy, Inc.
stockholders $
115,935 $
119,155 $
91,871 $
202,045
Net income
attributable to
noncontrolling
interests 19,059 21,803 15,120 44,376
Depreciation,
depletion and
amortization 198,563 145,552 372,286 266,751
Exploration and
abandonment costs 72 3,366 23,066 8,777
Interest expense, net 33,597 33,758 66,599 65,726
Interest income (103) (1,686) (394) (3,809)
Income tax expense 32,625 33,243 24,835 56,568
EBITDAX 399,748 355,191 593,383 640,434
Change in TRA
liability - 82
Stock-based
compensation 4,976 5,363 10,298 10,432
Acquisition costs - (2) 2
Gain on sale of
property - (5,166) (5,055)
Restructuring and
other termination
costs 1,562 1,562
Accretion of asset
retirement
obligations 353 359 698 713
Inventory write down - (17) 44
(Gain) loss on
derivatives (19,561) 9,466 100,126 20,259
Net settlements on
derivative
instruments (8,455) (7,019) (16,794) (9,892)
Net premiums on
options that settled
during the period (10,232) (18,072) (19,748) (34,598)
Adjusted EBITDAX $
368,391 $
340,103 $
669,525 $
622,421
(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 income before income tax expense, other revenues, depreciation, depletion and amortization, exploration and abandonment costs, stock-based compensation, acquisition costs, accretion of asset retirement obligations, other operating expense, net interest expense, gain on sale of property, restructuring and other termination costs, (gain) loss on derivatives, 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
Six Months Ended
June 30, June 30,
2019 2018 2019 2018
---
Operating cash margin reconciliation to
net income:
Net income
attributable to
Parsley Energy, Inc.
stockholders $
115,935 $
119,155 $
91,871 $
202,045
Net income
attributable to
noncontrolling
interests 19,059 21,803 15,120 44,376
Income tax expense 32,625 33,243 24,835 56,568
Other revenues (1,200) (1,953) (2,508) (5,547)
Depreciation,
depletion and
amortization 198,563 145,552 372,286 266,751
Exploration and
abandonment costs 72 3,366 23,066 8,777
Stock-based
compensation 4,976 5,363 10,298 10,432
Acquisition costs - (2) 2
Accretion of asset
retirement
obligations 353 359 698 713
Other operating
expense 2,199 2,477 1,388 4,652
Interest expense, net 33,597 33,758 66,599 65,726
Gain on sale of
property - (5,166) (5,055)
Restructuring and
other termination
costs 1,562 1,562
(Gain) loss on
derivatives (19,561) 9,466 100,126 20,259
Change in TRA
liability - 82
Interest income (103) (1,686) (394) (3,809)
Other income (715) (234) (773) (535)
Operating cash margin $
387,362 $
365,501 $
704,174 $
665,437
Operating cash margin
per Boe $
30.38 $
37.25 $
29.30 $
36.52
Average price per
Boe, without
realized derivatives $
39.01 $
47.48 $
38.43 $
46.92
Operating cash margin
percentage 78
% 78
% 76
% 78
%
(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, gain on sale of property, restructuring and other termination costs, exploration and abandonment costs, acquisition costs, and change in TRA liability, while adjusting for noncontrolling interests 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 attributable to Parsley Energy, Inc. stockholders.
Parsley Energy, Inc. and Subsidiaries
Adjusted Net Income and Net Income Per Share
(Unaudited, in thousands, except per share data)(1)
Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
---
Net income
attributable to
Parsley Energy, Inc.
stockholders $
115,935 $
119,155 $
91,871 $
202,045
Adjustments:
(Gain) loss on
derivatives (19,561) 9,466 100,126 20,259
Net settlements on
derivative
instruments (8,455) (7,019) (16,794) (9,892)
Net premiums on
options that settled
during the period (10,232) (18,072) (19,748) (34,598)
Gain on sale of
property - (5,166) (5,055)
Restructuring and
other termination
costs 1,562 1,562
Exploration and
abandonment costs 72 3,366 23,066 8,777
Acquisition costs - (2) 2
Change in TRA
liability - 82
Change in
noncontrolling
interests 4,102 1,688 (10,220) 2,334
Change in estimated
income tax 7,023 2,961 (17,240) 3,482
Adjusted net income $
90,446 $
106,377 $
152,623 $
187,436
Net income per diluted
share -as
reported(2) $
0.41 $
0.44 $
0.33 $
0.76
Adjustments:
(Gain) loss on
derivatives $
(0.06) $
0.03 $
0.36 $
0.08
Net settlements on
derivative
instruments (0.03) (0.02) (0.06) (0.04)
Net premiums on
options that settled
during the period (0.04) (0.07) (0.07) (0.13)
Gain on sale of
property - (0.02) (0.02)
Restructuring and
other termination
costs 0.01 0.01
Exploration and
abandonment costs - 0.01 0.08 0.03
Change in
noncontrolling
interests 0.01 0.01 (0.03) 0.01
Change in estimated
income tax 0.02 0.01 (0.07) 0.01
Adjusted net income
per diluted share(3) $
0.32 $
0.39 $
0.55 $
0.70
Basic weighted average
shares outstanding -
as reported(2) 279,706 272,239 279,253 266,479
Effect of dilutive securities:
Restricted Stock and
Restricted Stock
Units 62 607 110 564
Diluted weighted
average shares
outstanding -as
reported(2) 279,768 272,846 279,363 267,043
Effect of dilutive securities:
Restricted Stock and
Restricted Stock
Units -
Diluted weighted
average shares
outstanding for
adjusted net
income(3) 279,768 272,846 279,363 267,043
(1) Certain
reclassifications
to prior
period amounts
have been made
to conform
with current
presentation.
(2) For the three
and six months
ended June 30,
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
and six months
ended June 30,
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)
3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
---
OPTION CONTRACTS:
---
CUSHING
Put Spreads - Cushing (MBbls/d)(2) 19.6 19.6
Long Put Price ($/Bbl) $
57.29 $
57.29
Short Put Price ($/Bbl) $
47.29 $
47.29
Three Way Collars - Cushing (MBbls/d)(3) 26.1 26.1
Short Call Price ($/Bbl) $
72.69 $
72.69
Long Put Price ($/Bbl) $
51.88 $
51.88
Short Put Price ($/Bbl) $
42.81 $
42.81
Collars - Cushing (MBbls/d)(4) 21.2 21.2
Short Call Price ($/Bbl) $
58.26 $
58.37
Long Put Price ($/Bbl) $
54.50 $
54.56
MIDLAND
Put Spreads - Midland (MBbls/d)(2) 4.9 4.9
Long Put Price ($/Bbl) $
60.00 $
60.00
Short Put Price ($/Bbl) $
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) 4.9 4.9 5.0 4.9
Long Put Price ($/Bbl) $
60.00 $
60.00 $
70.00 $
70.00
Short Put Price ($/Bbl) $
50.00 $
50.00 $
60.00 $
60.00
Three Way Collars - MEH (MBbls/d)(3) 3.3 3.3 36.7 36.3 19.6 19.6
Short Call Price ($/Bbl) $
75.00 $
75.00 $
75.98 $
75.98 $
76.63 $
76.63
Long Put Price ($/Bbl) $
60.00 $
60.00 $
59.57 $
59.57 $
58.79 $
58.79
Short Put Price ($/Bbl) $
50.00 $
50.00 $
49.58 $
49.58 $
48.79 $
48.79
BRENT
Three Way Collars - Brent (MBbls/d)(3) 8.2 8.2 8.2
Short Call Price ($/Bbl) $
75.00 $
75.00 $
75.00
Long Put Price ($/Bbl) $
62.40 $
62.40 $
62.40
Short Put Price ($/Bbl) $
52.40 $
52.40 $
52.40
Total Option Contracts (MBbls/d) 84.8 84.8 48.4 56.0 27.8 27.8
Premium Realization ($MM)(5) $
(11.8) $
(11.8) $
(12.2) $
(12.6) $
(6.9) $
(6.9)
BASIS SWAPS:
---
Midland-Cushing Basis Swaps (MBbls/d)(6) 35.9 35.9 5.0 5.0
Basis Differential ($/Bbl) $
(1.63) $
(0.78) $
0.25 $
0.25
MEH-Cushing Basis Swaps (MBbls/d)(6) 2.1 2.1
Basis Differential ($/Bbl) $
5.10 $
5.10
Parsley Energy, Inc. and Subsidiaries
Open Natural Gas Derivatives Positions(1)
3Q19 4Q19
---
OPTION CONTRACTS:
---
HENRY HUB
Three Way Collars -
Henry Hub (MMBtu/
d)(3) 32,609 32,609
Short Call Price
($/MMBtu) $
3.93 $
3.93
Long Put Price
($/MMBtu) $
3.00 $
3.00
Short Put Price
($/MMBtu) $
2.50 $
2.50
Total MMBtu/d Hedged 32,609 32,609
BASIS SWAPS:
---
Waha-Henry Hub Basis
Swaps (MMBtu/d)(6) 32,609 32,609
Basis Differential
($/MMBtu) $
(1.78) $
(1.64)
(1) As of
8/6/2019.
Prices
represent
the weighted
average
price of
contracts
scheduled
for
settlement
during the
period.
(2) When the
reference
price (WTI,
Midland,
MEH, or
Brent) 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.
