Parsley Energy Provides Update On 2020 Development Plans
AUSTIN, Texas, March 9, 2020 /PRNewswire/ -- Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today provided an update on its 2020 development program.
Updated 2020 Outlook
-- Parsley is revising its baseline capital budget assumption from a $50
WTI oil price to a $30-35 WTI oil price for the remainder of 2020.
-- Consistent with the Company's commitment to free cash flow generation
and in response to recent commodity price trends, Parsley has begun to
reduce development activity in 2020. During January and February,
Parsley operated 15 development rigs and five frac spreads on average.
On March 6, Parsley dropped to three frac spreads and has approved plans
to drop to 12 rigs as soon as practicable. Parsley plans to further
reduce its activity pace in the near-term.
-- Parsley had previously indicated it would expect to generate free cash
flow((1)) of at least $200 million during 2020 at a $50 WTI oil price.
In the context of $30-$35 WTI oil prices for the remainder of the year,
the Company would target at least $85 million of free cash flow((1)),
accomplished through incremental activity reductions, likely in
combination with lower service and equipment costs. In a lower oil price
environment, Parsley will adjust as needed to preserve its balance
sheet.
-- Parsley plans to provide additional detail on its formal 2020 guidance
ranges when it releases its first quarter 2020 financial results or as
needed.
Summary Comment and Outlook
"The combination of a strong balance sheet and corporate agility is critical in these challenging and volatile times," commented Matt Gallagher, Parsley's President and CEO. "We must act swiftly with an aim to preserve a stable free cash flow profile and remain committed to doing whatever is necessary to protect our balance sheet in the weeks and months ahead."
"Parsley is focused on maintaining value for the long term, this requires short term responses when posed with external attacks and shocks. We will focus on our rigorous project returns process and will not destroy capital if the commodities tape does not support sufficient returns. This approach worked in the 2015 - 2016 timeframe and will best position us again to emerge from this volatile time on our front foot ready to fight."
Hedging Update
In early March, Parsley restructured some of its existing hedge positions to provide additional protection to downside in oil prices and continues to actively manage its hedge position. A significant majority of Parsley's expected 2020 oil production is subject to hedge protection.
For details on Parsley's updated hedge position as of March 6, 2020, please see the tables below.
1Q20 2Q20 3Q20 4Q20 1Q21 2Q21
OPTION CONTRACTS:
---
Swaps - Cushing (MBbls/d)
(2) 11.0 11.0 11.0 11.0
Swap Price ($/Bbl) $
57.87 $
57.87 $
57.87 $
57.87
MIDLAND
Three Way Collars - Midland (MBbls/d)
(3) 30.3 32.4 22.3 22.3
Short Call Price ($/Bbl) $
65.87 $
65.97 $
65.67 $
65.67
Long Put Price ($/Bbl) $
55.18 $
55.24 $
55.27 $
55.27
Short Put Price ($/Bbl) $
45.18 $
45.24 $
45.27 $
45.27
Swaps - Midland (MBbls/d)
(2) 3.3 3.3
Swap Price ($/Bbl) $
55.20 $
55.20
MAGELLAN EAST HOUSTON ("MEH")
Three Way Collars - MEH (MBbls/d)
(3) 44.9 46.4 37.8 37.8 13.3 13.2
Short Call Price ($/Bbl) $
73.48 $
67.75 $
66.90 $
66.90 $
64.38 64.38
Long Put Price ($/Bbl) $
58.74 $
54.99 $
55.09 $
55.09 $
53.12 53.12
Short Put Price ($/Bbl) $
48.74 $
44.99 $
45.09 $
45.09 $
43.12 43.12
Put Spreads - MEH (MBbl/d)(4) 2.7 8.2 11.4 11.4
Put Price ($/Bbl) $
50.00 $
50.00 $
50.00 $
50.00
Short Put Price ($/Bbl) $
40.00 $
40.00 $
40.00 $
40.00
Swaps - MEH (MBbls/d)
(2) 4.2 4.2
Swap Price ($/Bbl) $
56.30 $
56.30
BRENT
Three Way Collars - Brent (MBbls/d)
(3) 11.5 13.0 13.0
Short Call Price ($/Bbl) $
74.29 $
73.13 $
73.13
Long Put Price ($/Bbl) $
62.29 $
62.25 $
62.25
Short Put Price ($/Bbl) $
52.29 $
52.25 $
52.25
Total Option Contracts (MBbls/d) 92.2 112.8 99.7 99.7 13.3 13.2
Premium Realization ($MM)
(5) $
(14.5) $
(10.8) $
(10.3) $
(10.3) $
(2.0) $
(2.0)
BASIS SWAPS:
---
Midland-Cushing Basis Swaps (MBbls/d)
(6) 18.9 18.9 14.0 14.0
Basis Differential ($/Bbl) $
(1.00) $
(1.00) $
(1.44) $
(1.44)
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.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this news release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent Parsley Energy's expectations or beliefs concerning future events, and it is possible that the results described in this news release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Parsley Energy's control, which could cause actual results to differ materially from the results discussed in the forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, Parsley Energy does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for Parsley Energy to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements found in the Company's filings with the Securities and Exchange Commission ("SEC"), including its Annual Report on Form 10-K. The risk factors and other factors noted in the Company's SEC filings could cause its actual results to differ materially from those contained in any forward-looking statement.
(1) As used in
this news
release, free
cash flow
(outspend), a
non-GAAP
financial
measure,
means net
cash provided
by operating
activities
before
transaction
expenses
related to
the
acquisition
of Jagged
Peak Energy
Inc. ("Jagged
Peak") and
changes in
operating
assets and
liabilities,
net of
acquisitions,
less accrual-
based
development
capital
expenditures.
The Company
is unable to
present a
reconciliation
of forward-
looking free
cash flow
(outspend)
because
components of
the
calculation,
including
changes in
working
capital
accounts, are
inherently
unpredictable.
Additionally,
estimating
the most
directly
comparable
GAAP measure
with the
required
precision
necessary to
provide a
meaningful
reconciliation
is extremely
difficult and
could not be
accomplished
without
unreasonable
effort.
(2) Parsley
receives the
swap price.
(3) When the
reference
price
(Midland,
MEH, or
Brent) is at
or above the
call price,
Parsley
receives the
call 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.
(4) When the
reference
price 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.
(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 Parsley
sells its oil
and gas
produced in
the Permian
Basin less
the WTI
Cushing
price.
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SOURCE Parsley Energy, Inc.
