Parsley Energy Announces First Quarter 2020 Financial And Operating Results; Provides Update On 2020 Development Plans
AUSTIN, Texas, May 4, 2020 /PRNewswire/ -- Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today announced financial and operating results for the quarter ended March 31, 2020. Additionally, Parsley provided an update to its 2020 development program. The Company has posted a presentation to its website that supplements the information in this release.
Updated 2020 Outlook
-- On March 11, 2020, the World Health Organization declared the novel
coronavirus 2019 ("COVID-19") a pandemic. COVID-19 has had a material
negative impact on global economic activity and, as a result, has also
caused significant global oil demand destruction. This unprecedented
decline, combined with recent periods of increased production from
foreign oil producers (most notably Saudi Arabia and Russia), resulted
in a sharp drop in near-term oil prices.
-- In light of this lower commodity price environment, Parsley is revising
its baseline capital budget assumption from a $30-$35 WTI oil price to a
$20-$30 WTI oil price for the remainder of 2020. In this environment,
the Company is reducing its 2020 capital budget to less than $700
million, with reported 1Q20 capital expenditures of $379 million
representing more than 50% of this revised full-year budget.
-- With regional oil prices recently trading below $20 per barrel, Parsley
has suspended all new drilling and completion activity in the near-term.
Parsley's future activity plans will continue to be driven by unhedged
return profiles.
-- Parsley remains committed to free cash flow generation and, in the
context of $20-$30 WTI oil prices for the remainder of the year, is now
targeting at least $300 million of free cash flow((1)) in 2020. In a
lower oil price environment, Parsley will adjust as needed to preserve
its balance sheet.
Recent Highlights
-- Parsley made strides on multiple fronts over the past three months to
reinforce the strength of its balance sheet:
-- In the first quarter of 2020, Parsley lowered its cost of debt and
extended its debt maturity profile by refinancing its outstanding
6.250% senior unsecured notes due 2024 with 4.125% senior unsecured
notes due 2028.
-- Throughout March, Parsley added to its 2020 and 2021 hedge
positions, further insulating the Company's cash flow in the event
of a prolonged downturn in oil prices.
-- In April, Parsley entered into an amendment to its revolving credit
agreement, which reaffirmed its borrowing base at $2.7 billion,
increased the elected commitment amount from $1.0 billion to $1.075
billion, and extended the maturity date by two years to October 28,
2023.
-- Declared 2Q20 quarterly dividend of $0.05 per share((2)) payable on June
19, 2020.
-- Parsley successfully integrated the assets of Jagged Peak Energy Inc.
("Jagged Peak"), following the acquisition closing on January 10, 2020.
Parsley is reaffirming its previously disclosed synergy targets for
corporate cost optimization, which were outlined when the transaction
was announced in October 2019.
-- 1Q20 net oil production increased 41% quarter-over-quarter and 61%
year-over-year to 126.6 MBo per day. Total 1Q20 net production averaged
197.0 MBoe per day.
Summary Comment and Outlook
"In the face of unparalleled global demand destruction, one thing of certainty is that demand will recover from recent lows, but the magnitude and timing are less clear," commented Matt Gallagher, Parsley's President and CEO. "In these challenging times, we remain focused on controlling what we can control and making sound incremental investment decisions based on the facts at hand. Parsley responded decisively on multiple fronts to adapt to rapidly changing market conditions over the past two months and our company is well built for the endurance test now facing the industry. Parsley's 2020 activity plans will remain flexible, but we remain inflexible in our commitment to allocate incremental capital based on unhedged rates of return in prevailing market conditions. Regardless of the activity scenario we pursue for the remainder of the year, we are committed to generating healthy free cash flow in 2020, exiting the year with a solid balance sheet, ample scale, a shallower oil base decline, and visibility to sustained free cash flow in 2021 and beyond. In short, we will endure with relevance."
Operational Update
During the first quarter of 2020, the Company spud 51 and placed on production 46 gross operated horizontal wells. Parsley's working interest on wells placed on production was approximately 97%, with an average completed lateral length of approximately 9,400 feet. The Company placed on production 28 gross operated horizontal wells in the Midland Basin, with the remainder placed on production in the Delaware Basin.
During January and February, Parsley operated 15 development rigs and five frac spreads before steadily dropping activity throughout March. In April, as a result of regional oil prices trading below $20 per barrel, Parsley temporarily suspended all new drilling and completion operations. Parsley plans to reactivate operations at a stabilized activity level of four-to-five rigs and one-to-two frac spreads when oil market fundamentals are more constructive and in line with Parsley's baseline price assumptions. As a result of these reduced activity levels, Parsley estimates that it will record a charge of approximately $15 million during 2Q20 related to the early termination of certain rig contracts.
In mid-March, Parsley began voluntarily shutting in approximately 400 wells, most of which are vertical wells, for economic reasons. Net oil production associated with these higher per-Boe cost wells was approximately 1-2 MBo per day. In mid-April, Parsley voluntarily shut in several pads that were flaring natural gas, most of which were recently acquired from Jagged Peak in the Delaware Basin. These wells had combined net oil production of approximately 4-5 MBo per day. Throughout the first quarter, Parsley implemented various midstream solutions to mitigate flaring on the recently acquired assets and expects to significantly and more permanently mitigate flaring on these remaining Delaware Basin pads in the coming months.
In addition to the aforementioned shut-ins of 5-7 MBo per day, Parsley expects to voluntarily curtail up to 23 MBo per day of net oil production volumes in May based on near-term regional pricing dynamics. Parsley does not expect to incur any transportation-related deficiency expenses as a result of these temporary production curtailments. Parsley will continue to evaluate its voluntary curtailment level on a regular basis and will adjust production levels quickly and responsibly as market conditions evolve.
Financial Update
Healthy execution in 1Q20 translated to strong performance in key financial measures.
Profitability
During 1Q20, the Company recorded net loss attributable to its stockholders of $3.4 billion, or $9.20 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 1Q20 was $107.2 million, or $0.29 per share.((1))
Adjusted earnings before interest, income taxes, depreciation, depletion, amortization, and exploration expense ("Adjusted EBITDAX") for 1Q20 was $457.2 million.((1) )
As a result of the recent fall in oil prices and Parsley's decision to significantly reduce its near-term development activity plans, the Company recognized a non-cash impairment charge of $4.4 billion for certain proved reserves during 1Q20. In addition, the Company recognized leasehold abandonment and impairment charges associated with unproved oil and natural gas properties of $557 million during 1Q20.
Realized Pricing
During 1Q20, Parsley reported an average unhedged oil price realization of $45.32 per Bbl net of transportation costs, representing a discount of $0.49 to the average WTI Cushing price((3)) for the quarter.
Operating Costs
During the first quarter of 2020, the Company reported lease operating expense ("LOE") per Boe of $4.11. Parsley expects supplier price reductions, the shut-in of higher per-Boe cost vertical wells, and continued utilization of the Company's integrated water handling system will help offset a decrease in near-term production volumes. However, given ongoing uncertainty relating to commodity prices and the Company's production volumes, which has created a uniquely challenging operating environment, Parsley is temporarily suspending its unit cost guidance.
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 $2.01 and $1.65, respectively, representing Company-low record levels in each case. Encouraging G&A cost trends are a function of ongoing corporate cost savings initiatives including Executive Vice Presidents and more senior officers electing to reduce their respective 2020 cash compensation by at least 50% when compared to 2019. During 1Q20, Parsley incurred restructuring and other termination costs of $34.8 million and acquisition costs of $14.4 million, largely related to severance agreements, relocation expenses and advisor fees associated with Parsley's acquisition of Jagged Peak. These one-time costs are reported separately from the Company's G&A and cash based G&A. Parsley now expects full-year 2020 cash based G&A of approximately $130 million, a reduction of approximately $35 million versus the midpoints of prior guidance.((4))
Healthy realized oil pricing and continued focus on cost controls drove a strong operating cash margin of $22.34 per Boe, or 72% of the Company's average realized price per Boe.((1) )
Capital Expenditures
Parsley reported capital expenditures of $379 million during the first quarter of 2020, comprised of $372 million for operated drilling, completion, and equipment activity, and $7 million associated with water infrastructure and non-operated development activity. Parsley is reducing its full-year 2020 capital guidance from less than $1.0 billion to less than $700 million.
Return of Capital Program
Parsley Energy today announced that its Board of Directors declared a quarterly dividend of $0.05 per share.((2) )The dividend is payable on June 19, 2020, to shareholders of record on June 9, 2020.
Liquidity and Hedging
The Company entered into an amendment to its revolving credit agreement on April 27, 2020, which reaffirmed its borrowing base at $2.7 billion, increased the elected commitment amount from $1.0 billion to $1.075 billion, and extended the maturity date by two years to October 28, 2023. As of March 31, 2020, Parsley had approximately $739 million of liquidity, consisting of $45 million of cash and cash equivalents and an availability of $693 million on the Company's revolver.((5))
In this lower commodity price environment, Parsley proactively managed its hedge position, restructuring its existing 2020 hedge positions to provide additional protection against lower oil prices using swaps and two-way collars. Additionally, Parsley has also moved aggressively to protect its 2021 cash flow by adding swap positions.
The Company now expects net settlement gains of nearly $650 million during 2Q20 through 4Q21 under a go forward $30 WTI oil price and current basis differentials.((6)) This represents an increase of more than $350 million in aggregate downside protection from the Company's hedge position on February 19, 2020. 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, 2020.
2020 Guidance((7))
In light of the lower commodity price environment, the Company is reducing its 2020 capital budget to less than $700 million, with reported 1Q20 capital expenditures of $379 million representing more than 50% of this revised full-year budget. Given recent market volatility and ongoing uncertainty, the Company has temporarily suspended its detailed guidance on production, activity and unit costs. For further detail, please see the table below.
Prior
Revised
2020 Guidance
2020 Guidance
Production
---
Annual net oil
production (MBo/d)
125-133
Temporarily Suspended
Annual net total
production (MBoe/d)
200-210
Capital Program
---
Total development
expenditures ($MM)
$1,600-$1,800
<$700
Drilling, completion, &
equipment ($MM)
$1,500-$1,650
<$650
Other ($MM)
$100-$150
~$50
Activity
---
Gross operated
horizontal POPs(8)
180-190
Midland Basin (% of
total) ~65%
Delaware Basin (% of
total) ~35%
Temporarily Suspended
Average lateral length
9,500'-10,000'
Gross operated lateral
footage (000's)
1,710'-1,900'
Average working
interest ~90%
Unit Costs
---
Lease operating
expenses ($/Boe)
$3.50-$4.50
Cash general and
administrative
expenses ($/Boe)
$2.00-$2.40
Temporarily Suspended
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 2020 on Tuesday, May 5, 2020 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 12, 2020 by dialing 877-660-6853 (United States/Canada) or 201-612-7415 (International). Conference ID: 13702189. 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 Citi Global Energy and Utilities Virtual Conference on May 13, 2020, the RBC Global Energy and Power Executive Conference on June 2, 2020, and the 5th Annual Wells Fargo Securities West Coast Energy Conference on June 9-10, 2020.
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 most recent Annual Report on Form 10-K and any subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-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) "Cash based
G&A per Boe",
"Adjusted
EBITDAX",
"operating
cash margin",
"free cash
flow
(outspend)",
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,
free cash
flow
(outspend),
and adjusted
net income to
GAAP
financial
measures,
please see
the tables
and
associated
commentary
below under
Reconciliation
of Non-GAAP
Financial
Measures. The
Company has
also provided
a definition
and
reconciliation
of the non-
GAAP
financial
measure of
"Discretionary
Cash Flow per
Share" in the
tables and
associated
commentary
below under
Reconciliation
of Non-GAAP
Financial
Measures. 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.
Furthermore,
the Company's
current 2020
target of at
least $300
million of
free cash
flow is based
on WTI oil
prices of
$20-$30 for
the remainder
of the year.
In the event
of continued
market
volatility
and
uncertainty,
Parsley may
not achieve
this free
cash flow
target.
(2) Dividend to be
paid to all
Company
equity
holders,
including
shareholders
of Class A
common stock
and holders
of Parsley
Energy, LLC
units/Class
B common
stock.
(3) Represents
Bloomberg-
sourced 1Q20
average WTI
Cushing
price.
(4) The midpoints
of Parsley's
prior per
unit cash G&A
and Boe
production
guidance
ranges were
$2.20 per Boe
and 205 MBoe/
d,
respectively.
This implied
2020 cash G&A
expense of
approximately
$165 million
at the
midpoints of
prior
guidance
ranges.
(5) Revolver
availability
is net of
letters of
credit.
(6) Midland,
Magellan East
Houston, and
Brent pricing
differentials
to WTI
Cushing based
on forward
strip pricing
as of
5/1/2020. At
$20 WTI and
basis
differentials
as of
5/1/2020,
Parsley
expects more
than $1
billion of
net
settlement
gains during
2Q20-4Q21.
(7) Except as
otherwise
stated, all
estimates,
projections
and/or
guidance
contained in
this press
release are
based on
$20-$30 WTI
oil price per
barrel for
the remainder
of 2020. If
the WTI oil
price trades
either below
or above this
range during
all or a
portion of
the remainder
of 2020,
investors are
cautioned
that these
estimates,
projections
and/or
guidance
would be
materially
impacted.
(8) Wells placed
on
production.
- Tables to Follow -
Parsley Energy, Inc. and Subsidiaries
Selected Operating Data
(Unaudited)
Three Months Ended
March 31, 2020 December 31, 2019 March 31, 2019
Net production volumes:
Oil (MBbls) 11,523 8,241 7,102
Natural gas (MMcf) 16,667 13,966 10,488
Natural gas liquids
(MBbls) 3,626 2,882 2,436
Total (MBoe) 17,927 13,451 11,286
Average daily net
production (Boe/d) 197,000 146,207 125,400
Average sales prices(1) :
Oil, without realized
derivatives (per Bbl) $
45.32 $
56.40 $
51.83
Oil, with realized
derivatives (per Bbl) $
49.17 $
55.05 $
49.40
Natural gas, without
realized derivatives
(per Mcf) $
0.31 $
0.97 $
1.38
Natural gas, with
realized derivatives
(per Mcf) $
0.50 $
0.99 $
1.33
Natural gas liquids (per
Bbl) $
8.95 $
14.14 $
17.97
Average price per Boe,
without realized
derivatives $
31.23 $
38.59 $
37.78
Average price per Boe,
with realized
derivatives $
33.88 $
37.79 $
36.20
Average costs (per Boe):
Lease operating expenses $
4.11 $
3.54 $
3.65
Transportation and
processing costs $
0.79 $
1.06 $
0.73
Production and ad valorem
taxes $
2.07 $
2.12 $
2.43
Depreciation, depletion
and amortization $
15.32 $
15.67 $
15.39
General and
administrative expenses
(including stock-based
compensation) $
2.01 $
3.20 $
3.37
General and
administrative expenses
(cash based) $
1.65 $
2.81 $
2.90
(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)
Three Months Ended March 31,
2020 2019
REVENUES
Oil sales $
522,172 $
368,126
Natural gas sales 5,169 14,452
Natural gas liquids sales 32,435 43,785
Other 5,027 1,308
Total revenues 564,803 427,671
OPERATING EXPENSES
Lease operating expenses 73,608 41,172
Transportation and processing costs 14,195 8,257
Production and ad valorem taxes 37,183 27,407
Depreciation, depletion and
amortization 274,680 173,723
General and administrative expenses
(including stock-based
compensation) 35,964 38,037
Exploration and abandonment costs 561,611 22,994
Impairment 4,374,253
Acquisition costs 14,425
Accretion of asset retirement
obligations 435 345
Gain on sale of property (10)
Restructuring and other termination
costs 34,769
Other operating income (expense) 169 (811)
Total operating expenses 5,421,282 311,124
OPERATING (LOSS) INCOME (4,856,479) 116,547
OTHER INCOME (EXPENSE)
Interest expense, net (41,679) (33,002)
Loss on early extinguishment of
debt (21,388)
Gain (loss) on derivatives 545,692 (119,687)
Change in TRA liability 70,529
Interest income 249 291
Other (expense) income (3,983) 58
Total other income (expense), net 549,420 (152,340)
LOSS BEFORE INCOME TAXES (4,307,059) (35,793)
INCOME TAX BENEFIT 570,963 7,790
NET LOSS (3,736,096) (28,003)
LESS: NET LOSS ATTRIBUTABLE TO
NONCONTROLLING INTERESTS 369,696 3,939
NET LOSS ATTRIBUTABLE TO PARSLEY
ENERGY, INC. STOCKHOLDERS $
(3,366,400) $
(24,064)
Net loss per common share:
Basic $
(9.20) $
(0.09)
Diluted $
(9.20) $
(0.09)
Weighted average common shares outstanding:
Basic 366,064 278,794
Diluted 366,064 278,794
Parsley Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
March 31, 2020 December 31, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents $
45,274 $
20,739
Accounts receivable, net of allowance for doubtful accounts:
Joint interest owners and other 44,709 48,785
Oil, natural gas and natural gas liquids 126,917 192,216
Related parties 5,912 183
Short-term derivative instruments, net 529,431 127,632
Other current assets 56,949 8,818
Total current assets 809,192 398,373
PROPERTY, PLANT AND EQUIPMENT
Oil and natural gas properties, successful
efforts method 7,389,684 11,272,124
Accumulated depreciation and depletion - (2,117,963)
Total oil and natural gas properties, net 7,389,684 9,154,161
Other property, plant and equipment, net 184,240 170,306
Total property, plant and equipment, net 7,573,924 9,324,467
NONCURRENT ASSETS
Operating lease assets, net of accumulated
depreciation 124,233 128,529
Long-term derivative instruments, net 95,335
Other noncurrent assets 4,430 4,845
Total noncurrent assets 223,998 133,374
TOTAL ASSETS $
8,607,114 $
9,856,214
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $
525,913 $
416,346
Revenue and severance taxes payable 180,429 154,556
Short-term derivative instruments, net 192,599 158,522
Current operating lease liabilities 55,354 61,198
Other current liabilities 4,028 5,002
Total current liabilities 958,323 795,624
NONCURRENT LIABILITIES
Long-term debt 2,998,688 2,182,832
Deferred tax liability 11,158 193,409
Operating lease liability 71,510 69,195
Payable pursuant to tax receivable
agreement - 70,529
Long-term derivative instruments, net 17,488
Asset retirement obligations 27,368 20,538
Financing lease liability 1,706 1,320
Other noncurrent liabilities 188 119
Total noncurrent liabilities 3,128,106 2,537,942
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, 378,295,514 shares
issued and 377,578,206 shares outstanding
at March 31, 2020 and 282,260,133 shares
issued and 281,241,443 shares outstanding
at December 31, 2019 3,783 2,822
Class B, $0.01 par value, 125,000,000
shares authorized, 35,147,222 and
35,420,258 shares issued and outstanding
at March 31, 2020 and December 31, 2019 352 355
Additional paid in capital 6,994,612 5,200,795
(Accumulated deficit) retained earnings (2,814,540) 570,889
Treasury stock, at cost, 717,308 shares and
1,018,690 shares at March 31, 2020 and
December 31, 2019 (11,049) (17,428)
Total stockholders' equity 4,173,158 5,757,433
Noncontrolling interests 347,527 765,215
Total equity 4,520,685 6,522,648
TOTAL LIABILITIES AND EQUITY $
8,607,114 $
9,856,214
Parsley Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Three Months Ended March 31,
2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $
(3,736,096) $
(28,003)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and
amortization 274,680 173,723
Leasehold abandonments and
impairments 556,512 22,189
Impairment 4,374,253
Accretion of asset retirement
obligations 435 345
Gain on sale of property (10)
Loss on early extinguishment
of debt 21,388
Stock-based compensation 11,140 5,322
Deferred income tax benefit (570,963) (7,790)
Change in TRA liability (70,529)
(Gain) loss on derivatives (545,692) 119,687
Net cash received (paid) for
derivative settlements 16,902 (5,072)
Net cash received (paid) for
option premiums 17,995 (10,440)
Other 3,269 1,056
Changes in operating assets and liabilities, net
of acquisitions:
Accounts receivable 145,516 (37,989)
Accounts receivable-related
parties (5,729) (2,110)
Other current assets (3,601) 1,438
Other noncurrent assets 91 (3,308)
Accounts payable and accrued
expenses (129,560) (15,063)
Revenue and severance taxes
payable 25,873 (926)
Other noncurrent liabilities 69
Net cash provided by operating
activities 385,943 213,059
CASH FLOWS FROM INVESTING ACTIVITIES:
Development of oil and natural
gas properties (281,871) (352,650)
Acquisitions of oil and
natural gas properties (7,411) (13,846)
Cash acquired from the Jagged
Peak acquisition 53,347
Additions to other property
and equipment (2,146) (11,106)
Proceeds from sales of
property, plant and equipment 265 17,486
Other (1,142) 809
Net cash used in investing
activities (238,958) (359,307)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term
debt 1,140,000 120,000
Payments on long-term debt (1,223,752) (120,000)
Payments on financing lease
obligations (639) (676)
Debt issuance costs (6,407)
Repurchase of common stock (11,049) (5,309)
Dividends and distributions
paid (20,603)
Distributions to owners from
consolidated subsidiary - (603)
Net cash used in financing
activities (122,450) (6,588)
Net increase (decrease) in
cash, cash equivalents and
restricted cash 24,535 (152,836)
Cash, cash equivalents and
restricted cash at beginning
of period 20,739 163,216
Cash, cash equivalents and
restricted cash at end of
period $
45,274 $
10,380
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $
(38,049) $
(30,493)
Cash received for income taxes
$ $
240
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Asset retirement obligations
incurred, including changes
in estimate $
3,556 $
219
Additions to oil and natural
gas properties -change in
capital accruals $
96,893 $
53,654
Common stock issued for oil
and natural gas properties $
1,776,199
$
Net premiums on options that
settled during the period $
(13,004) $
(9,516)
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDAX
Adjusted EBITDAX is not a measure of net loss 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 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, impairment on long-lived assets, loss on early extinguishment of debt, gain on sale of property, restructuring and other termination costs, accretion of asset retirement obligations, (gain) loss on derivatives, net settlements on derivative instruments, net premiums on options that settled during the period and other expenses.
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 loss 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 structure, and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net loss as determined in accordance with GAAP or as an indicator of the Company's operating performance. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX. The Company's computations of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies. The Company believes that Adjusted EBITDAX is useful to investors as a widely followed measure of operating performance.
The following table presents a reconciliation of Adjusted EBITDAX to the GAAP financial measure of net loss attributable to Parsley Energy, Inc. stockholders for each of the periods indicated.
Parsley Energy, Inc. and Subsidiaries
Adjusted EBITDAX
(Unaudited, in thousands)
Three Months Ended March 31,
2020 2019
Adjusted EBITDAX reconciliation to net
loss attributable to Parsley, Energy,
Inc. stockholders:
Net loss attributable
to Parsley Energy,
Inc. stockholders $
(3,366,400) $
(24,064)
Net loss attributable
to noncontrolling
interests (369,696) (3,939)
Depreciation,
depletion and
amortization 274,680 173,723
Exploration and
abandonment costs 561,611 22,994
Interest expense, net 41,679 33,002
Interest income (249) (291)
Income tax expense (570,963) (7,790)
EBITDAX (3,429,338) 193,635
Change in TRA
liability (70,529)
Stock-based
compensation 6,390 5,322
Acquisition costs 14,425
Impairment on long-
lived assets 4,374,253
Loss on early
extinguishment of
debt 21,388
Gain on sale of
property (10)
Restructuring and
other termination
costs 34,769
Accretion of asset
retirement
obligations 435 345
(Gain) loss on
derivatives (545,692) 119,687
Net settlements on
derivative
instruments 60,549 (8,339)
Net premiums on
options that settled
during the period (13,004) (9,516)
Other expenses 3,569
Adjusted EBITDAX $
457,205 $
301,134
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 before income tax benefit, other revenues, depreciation, depletion and amortization, exploration and abandonment costs, stock-based compensation, impairment on long-lived assets, acquisition costs, accretion of asset retirement obligations, other operating expense, net interest expense, gain on sale of property, restructuring and other termination costs, loss on early extinguishment of debt, (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 the GAAP financial measure of net loss attributable to Parsley Energy, Inc. stockholders.
Parsley Energy, Inc. and Subsidiaries
Operating Cash Margin
(Unaudited, in thousands, except for per unit data)
Three Months Ended March 31,
2020 2019
Operating cash margin reconciliation to net
loss attributable to Parsley Energy Inc.
stockholders:
Net loss attributable
to Parsley Energy,
Inc. stockholders $
(3,366,400) $
(24,064)
Net loss attributable
to noncontrolling
interests (369,696) (3,939)
Income tax benefit (570,963) (7,790)
Other revenues (5,027) (1,308)
Depreciation,
depletion and
amortization 274,680 173,723
Exploration and
abandonment costs 561,611 22,994
Stock-based
compensation 6,390 5,322
Impairment on long-
lived assets 4,374,253
Acquisition costs 14,425
Accretion of asset
retirement
obligations 435 345
Other operating
expense 169 (811)
Interest expense, net 41,679 33,002
Gain on sale of
property (10)
Restructuring and
other termination
costs(1) 30,018
Loss on early
extinguishment of
debt 21,388
(Gain) loss on
derivatives (545,692) 119,687
Change in TRA
liability (70,529)
Interest income (249) (291)
Other income 3,983 (58)
Operating cash margin $
400,465 $
316,812
Operating cash margin
per Boe $
22.34 $
28.07
Average price per Boe,
without realized
derivatives $
31.23 $
37.78
Operating cash margin
percentage 72
% 74
%
(1) Excludes $4.8 million of non-cash
costs incurred related to
accelerated vesting of stock-
based compensation
Free Cash Flow (Outspend)
Free cash flow (outspend) is not a measure of net cash provided by operating activities as determined by GAAP. Free cash flow (outspend) is a supplemental non-GAAP financial measure that is used by the Company as an indicator of the Company's ability to manage its operating cash flow (outspend), internally fund its exploration and development activities, pay dividends, and to service or incur additional debt. The Company defines free cash flow (outspend) as net cash provided by operating activities before changes in operating assets and liabilities, net of acquisitions and acquisition and cash restructuring costs related to the acquisition of Jagged Peak, less accrual-based development capital expenditures. The amounts included in the calculations of free cash flow (outspend) were computed in accordance with GAAP.
Free cash flow (outspend) 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 free cash flow (outspend) to the GAAP financial measure of net cash provided by operating activities.
Parsley Energy, Inc. and Subsidiaries
Free Cash Flow (Outspend)
(Unaudited, in thousands)
Three Months Ended March 31,
2020 2019
Net cash provided by
operating activities $
385,943 $
213,059
Net change in
operating assets and
liabilities, net of
acquisitions (32,659) 57,958
Acquisition costs
related to the
acquisition of Jagged
Peak 14,425
Restructuring costs
related to the
acquisition of Jagged
Peak (excluding non-
cash) 30,018
Total discretionary
cash flow 397,727 271,017
Development of oil and
natural gas
properties (281,871) (352,650)
Additions to oil and
natural gas
properties -change
in capital accruals (96,893) (53,654)
Total accrual-based
development capital
expenditures (378,764) (406,304)
Free cash flow
(outspend) $
18,963 $
(135,287)
Discretionary Cash Flow Per Share
Discretionary cash flow is not a measure of net cash provided by operating activities as determined by GAAP. Discretionary cash flow is a supplemental non-GAAP financial measure that is used by the Company as an indicator of the drivers of trends in our operating cash flows, such as production, realized sales prices and operating costs, because it disregards the timing of settlement of operating assets and liabilities. The Company defines discretionary cash flow as net cash provided by operating activities before changes in operating assets and liabilities, net of acquisitions and acquisition and cash restructuring costs related to the acquisition of Jagged Peak. The amounts included in the calculations of discretionary cash flow were computed in accordance with GAAP.
Discretionary cash flow 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 discretionary cash flow (outspend) to the GAAP financial measure of net cash provided by operating activities.
Parsley Energy, Inc. and Subsidiaries
Discretionary Cash Flow Per Share
(Unaudited, in thousands)
Three Months Ended March 31,
2020 2019
Net cash provided by
operating activities $
385,943 $
213,059
Net change in
operating assets and
liabilities, net of
acquisitions (32,659) 57,958
Acquisition costs
related to the
acquisition of Jagged
Peak 14,425
Restructuring costs
related to the
acquisition of Jagged
Peak (excluding non-
cash) 30,018
Total discretionary
cash flow $
397,727 $
271,017
Discretionary cash
flow per diluted
share $
0.99 $
0.86
Weighted average
common shares
outstanding, class A 366,064 278,794
Weighted average
common shares
outstanding, class B 35,199 36,403
Adjusted weighted
average common shares
outstanding(1) 401,263 315,197
(1) PE Units (and a corresponding
number of shares of Class B common
stock) can be exchanged for Class
A common stock at an exchange
ratio of one share of Class A
common stock for each PE Unit (and
corresponding share of Class B
common stock) exchanged. As such,
assumes the exchange of all
outstanding PE Units (and
corresponding shares of Class B
common stock) for shares of Class
A common stock.
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 (gain) loss on derivatives, net settlements on derivative instruments, net premiums on options that settled during the period, gain on sale of property, restructuring and other termination costs, exploration and abandonment costs, impairment of long-lived assets, acquisition costs, change in TRA liability, loss on early extinguishment of debt, and other expenses, while adjusting for changes in noncontrolling interests, the associated changes in estimated income tax and changes to deferred tax asset valuation allowance. 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 (loss), operating income (loss), or any other measure of financial performance presented in accordance with GAAP. The following table presents a reconciliation of the non-GAAP financial measure of adjusted net income to the GAAP financial measure of net loss 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)
Three Months Ended March 31,
2020 2019
Net loss attributable to
Parsley Energy, Inc.
stockholders $
(3,366,400) $
(24,064)
Adjustments:
(Gain) loss on derivatives (545,692) 119,687
Net settlements on
derivative instruments 60,549 (8,339)
Net premiums on options
that settled during the
period (13,004) (9,516)
Gain on sale of property (10)
Restructuring and other
termination costs 34,769
Exploration and
abandonment costs 561,611 22,994
Impairment of long-lived
assets 4,374,253
Acquisition costs 14,425
Change in TRA liability (70,529)
Loss on early
extinguishment of debt 21,388
Other expenses 3,569
Change in noncontrolling
interests (379,881) (14,321)
Income taxes on above
adjustments(1) (303,144) (24,132)
Adjustment to deferred tax
asset valuation
allowance(2) (284,727)
Adjusted net income $
107,177 $
62,309
Net loss per diluted share
-as reported(1) $
(9.20) $
(0.09)
Adjustments:
(Gain) loss on derivatives (1.49) 0.42
Net settlements on
derivative instruments 0.17 (0.02)
Net premiums on options
that settled during the
period (0.04) (0.03)
Gain on sale of property -
Restructuring and other
termination costs 0.09
Exploration and
abandonment costs 1.53 0.08
Impairment of long-lived
assets 11.93
Acquisition costs 0.04
Change in TRA liability (0.19)
Loss on early
extinguishment of debt 0.06
Other expenses 0.01
Change in noncontrolling
interests (1.04) (0.05)
Income taxes on above
adjustments (0.83) (0.09)
Adjustment to deferred tax
asset valuation allowance (0.77)
Adjustment for change in
weighted average share
count 0.02
Adjusted net income per
diluted share
(4) $
0.29 $
0.22
Basic weighted average
shares outstanding -as
reported(3) 366,064 278,794
Effect of dilutive securities:
Class B Common Stock -
Restricted Stock and
Restricted Stock Units -
Diluted weighted average
shares outstanding -as
reported(3) 366,064 278,794
Effect of dilutive securities:
Class B Common Stock -
Restricted Stock and
Restricted Stock Units 610 369
Diluted weighted average
shares outstanding for
adjusted net income(4) 366,674 279,163
(1) The assumed
income tax
rate is 27%
for all
periods.
(2) Deferred tax
valuation
allowance
has been
adjusted to
reflect the
assumed
income tax
rate of 27%
for all
periods.
(3) For the three
months ended
March 31,
2020 and
2019, the
number of
weighted
average
diluted
shares used
to calculate
actual net
loss per
share is
based on the
fact that,
under the
"if
converted"
and
"treasury
stock"
methods,
Class B
Common Stock
and shares
of
restricted
stock and
restricted
stock units,
respectively,
were not
recognized
because the
effect would
have been
antidilutive.
(4) For purposes
of
calculating
adjusted net
income per
diluted
share for
the three
months ended
March 31,
2020 and
2019, 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)
2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21
CUSHING
Swaps -Cushing
(MBbls/d)(2) 11.0 11.0 11.0
Swap Price ($/Bbl) $
57.87 $
57.87 $
57.87
MIDLAND
Three Way Collars -Midland (MBbls/
d)(3) 4.6 13.8
Short Call Price ($/Bbl) $
55.00 $
51.65
Long Put Price ($/Bbl) $
40.00 $
35.66
Short Put Price ($/Bbl) $
30.00 $
25.66
Put Spreads -Midland
(MBbls/d)(4) 3.3
Long Put Price ($/Bbl) $
50.00
Short Put Price
($/Bbl) $
40.00
Two Way Collars -
Midland (MBbls/d)(5) 6.6 6.5 6.5
Short Call Price
($/Bbl) $
48.00 $
48.00 $
48.00
Long Put Price ($/Bbl) $
43.00 $
43.00 $
43.00
Swaps -Midland
(MBbls/d)(2) 21.5 12.5 3.3 5.0 5.0 5.0 5.0
Swap Price ($/Bbl) $
31.83 $
29.69 $
32.60 $
40.50 $
40.50 $
40.50 $
40.50
MAGELLAN EAST HOUSTON ("MEH")
Three Way Collars -
MEH (MBbls/d)(3) 7.9 10.8 24.1 13.3 13.2 2.4 2.4
Short Call Price
($/Bbl) $
55.00 $
55.00 $
51.22 $
64.38 $
64.38 $
55.00 $
55.00
Long Put Price ($/Bbl) $
40.00 $
40.00 $
37.23 $
53.13 $
53.13 $
40.00 $
40.00
Short Put Price
($/Bbl) $
30.00 $
30.00 $
27.23 $
43.13 $
43.13 $
30.00 $
30.00
Put Spreads -MEH
(MBbls/d)(4) 8.2 29.3 29.3
Long Put Price ($/Bbl) $
50.00 $
36.11 $
36.11
Short Put Price
($/Bbl) $
40.00 $
26.11 $
26.11
Swaps -MEH (MBbls/
d)(2) 35.8 29.0 15.7 52.0 52.0 52.0 52.0
Swap Price ($/Bbl) $
29.58 $
35.24 $
39.28 $
40.74 $
40.74 $
40.74 $
40.74
BRENT
Two Way Collars -
Brent (MBbls/d)(5) 3.3 6.5 6.5
Short Call Price
($/Bbl) $
52.10 $
52.30 $
52.30
Long Put Price ($/Bbl) $
47.10 $
47.30 $
47.30
Swaps -Brent (MBbls/
d)(2) 7.9 11.2 6.3 22.0 22.0 22.0 22.0
Swap Price ($/Bbl) $
44.81 $
41.77 $
47.40 $
44.46 $
44.46 $
44.46 $
44.46
Total Hedged Volumes
(MBbls/d) 105.6 121.4 116.5 92.3 92.2 81.4 81.4
Premium Realization
($MM)(6) $
8.1 $
7.3 $
7.3 $
(2.0) $
(2.0) $
(0.7) $
(0.7)
Fixed Future
Settlements ($MM)(7) $
16.7
Midland-Cushing Basis
Swaps (MBbls/d)(8) 18.9 14.0 14.0
Basis Differential
($/Bbl) $
(1.00) $
(1.44) $
(1.44)
Rollfactor Swaps
(MBbls/d)(9) 12.1 35.9 35.9
Swap Price ($/Bbl) $
(2.44) $
(2.44) $
(2.44)
Parsley Energy, Inc. and Subsidiaries
Open Natural Gas Derivatives Positions(1)
2Q20 3Q20 4Q20
WAHA
Swaps -Waha (MMBtu/d)(2) 48,242 48,152 48,152
Swap Price ($/MMBtu) $
0.70 $
0.90 $
0.86
(1) Hedge
positions as
of 5/1/2020.
Prices
represent
the weighted
average
price of
contracts
scheduled
for
settlement
during the
period.
(2) Parsley
receives the
swap price.
(3) When the
reference
price
(Midland,
MEH, or
Brent) is at
or above the
short call
price,
Parsley
receives the
short 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) When the
reference
price is
above the
short call
price,
Parsley
receives the
short call
price. When
the
reference
price is
between the
short call
price and
the put
price,
Parsley
receives the
reference
price. When
the
reference
price is
below the
put price,
Parsley
receives the
put price.
(6) Premium
realizations
represent
net premiums
paid
(including
deferred
premiums),
which are
recognized
as income or
loss in the
period of
settlement.
(7) Dollar value
of expected
net
settlements
from
monetization
of certain
MEH and
Midland swap
contracts.
Monetized
swap
contracts
have been
eliminated
by
offsetting
swaps and
are not
represented
in the chart
above.
(8) 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.
(9) 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.
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SOURCE Parsley Energy, Inc.
