Parsley Energy Announces Second Quarter 2020 Financial and Operating Results; Provides Update on 2020 Development Plans
AUSTIN, Texas, Aug. 5, 2020 /PRNewswire/ -- Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today announced financial and operating results for the quarter ended June 30, 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
-- In light of improved oil pricing and reduced volatility, Parsley is
revising its baseline capital budget assumption from a $20-$30 WTI oil
price to a $35 WTI oil price for the remainder of 2020. In this context,
the Company is narrowing its 2020 capital budget to $650-$700 million
from less than $700 million.
-- With regional oil prices trading below $20 per barrel during a portion
of 2Q20, Parsley suspended all new drilling and completion activity
during May and June. In recent weeks, with regional oil prices trading
consistently above the Company's baseline capital budget assumption of
$35 per barrel, Parsley has reactivated two rigs and two frac spreads.
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 $35 WTI oil prices for the remainder of the year, is now
targeting at least $350 million of free cash flow((1)) in 2020, which is
an increase of $50 million from the Company's prior target.
Recent Highlights
-- Generated positive free cash flow((1)) in 2Q20.
-- Paid 2Q20 quarterly dividend of $0.05 per share on June 19, 2020 and
declared 3Q20 quarterly dividend of $0.05 per share((2)) payable on
September 18, 2020.
-- Parsley has reduced natural gas flaring at locations previously operated
by Jagged Peak Energy Inc. ("Jagged Peak") by approximately 90% since
acquiring the properties in January 2020. At a corporate level, Parsley
flared less than 1.5% of its gross natural gas production in 2Q20.
-- Parsley's detailed preparation helped steer a collaborative effort
across multiple disciplines to manage 2Q20 production curtailments in a
safe, environmentally responsible, and efficient manner. The Company
curtailed more than 20% of its oil production in May and restored the
vast majority of these volumes in June.
-- 2Q20 net oil production decreased 11% quarter-over-quarter and increased
30% year-over-year to 112.6 MBo per day. Total 2Q20 net production
averaged 183.2 MBoe per day.
Summary Comment and Outlook
"From a macro standpoint, the second quarter represented an unforgiving stress test for much of our industry," commented Matt Gallagher, Parsley's President and CEO. "The worst may be behind us - prices have found firmer footing as oil markets seek a cautious equilibrium. However, at Parsley Energy, we harbor no illusions of the difficulties facing our industry and we remain well built for that endurance test. During this challenging second quarter, our team did not merely run in place, but instead progressed our corporate sustainability efforts on multiple fronts. On the financial front, we generated robust free cash flow and remain committed to free cash flow sustainability in 2021 and beyond. On the environmental front, we reduced natural gas flaring on recently acquired properties by approximately 90% and we will continue to advance our environmental sustainability efforts with tangible goals moving forward. I am proud of the Parsley team for focusing on controlling what was within our control and for delivering on our action plan during uncertain times."
Operational Update
During January and February, Parsley operated 15 development rigs and five frac spreads before steadily dropping activity throughout March. In late April, as a result of regional oil prices trading below $20 per barrel, Parsley suspended all new drilling and completion operations and did not deploy any rigs or frac spreads during May or June.
Parsley also proactively managed production volumes through voluntary curtailments during 2Q20 based on near-term regional pricing dynamics and environmental stewardship objectives. During May, at the height of these curtailments, Parsley actively curtailed more than 20% of its net oil production. The Company restored the vast majority of these curtailed volumes in June in a safe, environmentally responsible, and efficient manner.
Parsley utilized this collective downtime to advance various environmental stewardship initiatives, including implementing various midstream solutions to mitigate natural gas flaring. Parsley closed its acquisition of Jagged Peak in January 2020, inheriting properties that had collectively flared approximately 20% of their natural gas production in 2019. After six months of operating these assets, Parsley had utilized a variety of midstream solutions to help reduce natural gas flaring by approximately 90%.
During the second quarter of 2020, the Company spud 8 and placed on production 17 gross operated horizontal wells. Parsley's average working interest on wells placed on production was approximately 85%, with an average completed lateral length of approximately 9,500 feet. The Company placed on production 13 gross operated horizontal wells in the Midland Basin, with the remainder placed on production in the Delaware Basin.
In July, Parsley reactivated two rigs and two frac spreads given more constructive oil prices consistently trading above Parsley's baseline price assumptions. Provided market fundamentals do not deteriorate, Parsley anticipates moving to a stabilized activity level of four-to-five rigs and one-to-two frac spreads in early 4Q20.
Financial Update
Healthy execution in 2Q20, under challenging conditions, translated to strong performance in key financial measures.
Profitability
During 2Q20, the Company recorded net loss attributable to its stockholders of $0.4 billion, or $0.95 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 2Q20 was $10.1 million, or $0.03 per share.((1))
Adjusted earnings before interest, income taxes, depreciation, depletion, amortization, and exploration expense ("Adjusted EBITDAX") for 2Q20 was $211.6 million.((1) )
Realized Pricing
During 2Q20, Parsley reported an average hedged oil price realization of $31.47 per Bbl net of transportation costs. Given heightened volatility in regional oil prices during 2Q20, the Company elected to monetize certain financial hedges and concurrently entered into fixed price physical sales agreements with select marketers. In a rising oil price environment, this practice would result in larger realized hedge gains and lower unhedged oil price realizations, but would have no material impact to cash flow. During 2Q20, Parsley reported an average unhedged oil price realization of $18.30 per Bbl net of transportation costs. Absent any financial hedge monetization or fixed price physical agreements during 2Q20, the Company's average unhedged oil price realization would have increased by approximately $5.00 per Bbl, but there would have been no material change to the Company's average hedged oil price realization. Parsley has not entered into any additional fixed price physical agreements that would impact reported oil price realizations in the future.
Operating Costs
During the second quarter of 2020, the Company reported lease operating expense ("LOE") per Boe of $3.69, down 10% versus 1Q20 expense levels despite decreased production volumes. Favorable LOE unit cost trends were driven by supplier price reductions, the shut-in of higher per-Boe cost vertical wells, and continued utilization of the Company's integrated water handling system. Parsley is reinstating full-year 2020 LOE per Boe guidance at $3.75-$4.25, which reflects a tightening of the Company's initial guidance range of $3.50-$4.50 per Boe.
Both general and administrative expense ("G&A") per Boe and cash based G&A per Boe((1)), which excludes stock-based compensation expense, decreased year-over-year to $2.21 and $1.81, respectively. Encouraging G&A cost trends are a function of ongoing corporate cost savings initiatives, including the expedient integration of Jagged Peak, which helped accelerate the timeline for synergy capture. Parsley is reinstating full-year 2020 cash G&A per Boe guidance at $1.80-$1.90, a 16% reduction to the Company's initial guidance range of $2.00-$2.40 per Boe at the midpoints. Parsley now expects full-year 2020 cash based G&A of approximately $125 million or less, a reduction of at least $5 million from the prior forecast and a reduction of approximately $40 million versus the midpoints of initial guidance.((3))
Capital Expenditures
Parsley reported capital expenditures of $64 million during the second quarter of 2020, comprised of $60 million for operated drilling, completion, and equipment activity, and $4 million associated with water infrastructure and non-operated development activity.
Return of Capital Program
Today Parsley Energy's Board of Directors declared a quarterly dividend of $0.05 per share.((2) )The dividend is payable on September 18, 2020, to shareholders of record on September 8, 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 June 30, 2020, Parsley had approximately $640.6 million of liquidity, consisting of $2.3 million of cash and cash equivalents and an availability of $638.3 million on the Company's revolver.((4))
Consistent with the Company's strategy to methodically protect its future cash flow, Parsley recently initiated a 2022 hedge position. 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, 2020.
2020 Guidance((5))
The Company is narrowing its 2020 capital budget to $650-$700 million (previously less than $700 million), with reported 1H20 capital expenditures of $443 million representing more than 60% of this full-year budget. Following strong operating cost control in the second quarter of 2020, Parsley is reinstating full-year 2020 guidance on unit costs. Out of an abundance of caution, the Company has not elected to reinstate detailed guidance on production and activity given ongoing uncertainty caused by the novel coronavirus 2019, or "COVID-19." For further detail, please see the table below.
Initial
Revised
2020 Guidance 2020 Guidance
Production
---
Annual
net
oil
production
(MBo/
d)
125-133 Temporarily Suspended
Annual
net
total
production
(MBoe/
d)
200-210
Capital
Program
---
Total
development
expenditures
($MM)
$1,600-$1,800
$650-$700
Drilling,
completion,
&
equipment
($MM)
$1,500-$1,650
$625-$675
Other
($MM)
$100-$150
~$25
Activity
---
Gross
operated
horizontal
POPs(6)
180-190
Midland
Basin
(%
of
total) ~65%
Delaware
Basin
(%
of
total) ~35% Temporarily Suspended
Average
lateral
length
9,500'-10,000'
Gross
operated
lateral
footage
(000's)
1,710'-1,900'
Average
working
interest ~90%
Unit
Costs
---
Lease
operating
expenses
($/Boe)
$3.50-$4.50
$3.75-$4.25
Cash
general
and
administrative
expenses
($/Boe)
$2.00-$2.40
$1.80-$1.90
Production
and
ad
valorem
taxes
(%
of
total
revenue) 6%-7% 6%-8%
Conference Call Information
Parsley Energy will host a conference call and webcast to discuss its results for the second quarter of 2020 on Thursday, August 6, 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 August 13, 2020 by dialing 877-660-6853 (United States/Canada) or 201-612-7415 (International). Conference ID: 13706311. 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 Simmons Gleneagles Virtual Conference on September 2, 2020 and the Barclays CEO Energy-Power Virtual Conference on September 9, 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.
- Tables to Follow -
(1) "Cash based
G&A per Boe",
"Adjusted
EBITDAX",
"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, 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 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 $350
million of
free cash
flow is based
on a WTI oil
price of $35
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) The midpoints
of Parsley's
initial 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
initial
guidance
ranges.
(4) Revolver
availability
is net of
letters of
credit.
(5) Except as
otherwise
stated, all
estimates,
projections
and/or
guidance
contained in
this press
release are
based on $35
WTI oil price
per barrel
for the
remainder of
2020. If the
WTI oil price
trades below
this level
during all or
a portion of
the remainder
of 2020,
investors are
cautioned
that these
estimates,
projections
and/or
guidance
would be
materially
impacted.
(6) Wells placed
on
production.
Parsley Energy, Inc. and Subsidiaries
Selected Operating Data
(Unaudited)
Three Months Ended
June 30, 2020 March 31, 2020 June 30, 2019
Net production volumes:
Oil (MBbls) 10,242 11,523 7,881
Natural gas (MMcf) 16,949 16,667 13,004
Natural gas liquids
(MBbls) 3,600 3,626 2,701
Total (MBoe) 16,667 17,927 12,749
Average daily net
production (Boe/d) 183,154 197,000 140,099
Average sales prices(1) :
Oil, without realized
derivatives (per Bbl) $
18.30 $
45.32 $
58.23
Oil, with realized
derivatives (per Bbl) $
31.47 $
49.17 $
55.42
Natural gas, without
realized derivatives
(per Mcf) $
0.71 $
0.31 $
0.01
Natural gas, with
realized derivatives
(per Mcf) $
0.65 $
0.50 $
0.28
Natural gas liquids (per
Bbl) $
5.10 $
8.95 $
14.18
Average price per Boe,
without realized
derivatives $
13.07 $
31.23 $
39.01
Average price per Boe,
with realized
derivatives $
21.10 $
33.88 $
37.54
Average costs (per Boe):
Lease operating expenses $
3.69 $
4.11 $
3.35
Transportation and
processing costs $
0.87 $
0.79 $
0.52
Production and ad valorem
taxes $
1.40 $
2.07 $
2.41
Depreciation, depletion
and amortization $
7.65 $
15.32 $
15.57
General and
administrative expenses
(including stock-based
compensation) $
2.21 $
2.01 $
2.74
General and
administrative expenses
(cash based) $
1.81 $
1.65 $
2.35
(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 June 30, Six Months Ended June 30,
2020 2019 2020 2019
REVENUES
Oil sales $
187,447 $
458,888 $
709,619 $
827,014
Natural gas sales 12,068 141 17,237 14,593
Natural gas liquids sales 18,364 38,312 50,799 82,097
Other 2,331 1,200 7,358 2,508
Total revenues 220,210 498,541 785,013 926,212
OPERATING EXPENSES
Lease operating expenses 61,549 42,696 135,157 83,868
Transportation and processing costs 14,565 6,608 28,760 14,865
Production and ad valorem taxes 23,362 30,744 60,545 58,151
Depreciation, depletion and amortization 127,465 198,563 402,145 372,286
General and administrative expenses (including stock-based compensation) 36,806 34,907 72,770 72,944
Exploration and abandonment costs 2,022 72 563,633 23,066
Impairment - 4,374,253
Acquisition costs 593 15,018
Accretion of asset retirement obligations 482 353 917 698
Rig termination costs 15,106 15,106
Gain on sale of property (15) (25)
Restructuring and other termination costs 2,528 1,562 37,297 1,562
Other operating expenses 11,431 2,199 11,600 1,388
Total operating expenses 295,894 317,704 5,717,176 628,828
OPERATING (LOSS) INCOME (75,684) 180,837 (4,932,163) 297,384
OTHER INCOME (EXPENSE)
Interest expense, net (40,454) (33,597) (82,133) (66,599)
Gain (loss) on early extinguishment of debt 295 (21,093)
(Loss) gain on derivatives (280,006) 19,561 265,686 (100,126)
Change in TRA liability - 70,529
Interest income 20 103 269 394
Other income (expense) 117 715 (3,866) 773
Total other (expense) income, net (320,028) (13,218) 229,392 (165,558)
(LOSS) INCOME BEFORE INCOME TAXES (395,712) 167,619 (4,702,771) 131,826
INCOME TAX BENEFIT (EXPENSE) 6,183 (32,625) 577,146 (24,835)
NET (LOSS) INCOME (389,529) 134,994 (4,125,625) 106,991
LESS: NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS 33,113 (19,059) 402,809 (15,120)
NET (LOSS) INCOME ATTRIBUTABLE TO PARSLEY ENERGY, INC. STOCKHOLDERS $
(356,416) $
115,935 $
(3,722,816) $
91,871
Net (loss) income per common share:
Basic $
(0.95) $
0.41 $
(10.02) $
0.33
Diluted $
(0.95) $
0.41 $
(10.02) $
0.33
Weighted average common shares outstanding:
Basic 376,950 279,706 371,507 279,253
Diluted 376,950 279,768 371,507 279,363
Parsley Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
June 30, 2020 December 31, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents $
2,265 $
20,739
Accounts receivable, net of allowance for doubtful accounts:
Joint interest owners and other 37,331 48,785
Oil, natural gas and natural gas liquids 113,072 192,216
Related parties 4,264 183
Short-term derivative instruments, net 156,460 127,632
Other current assets 20,134 8,818
Total current assets 333,526 398,373
PROPERTY, PLANT AND EQUIPMENT
Oil and natural gas properties, successful
efforts method 7,463,424 11,272,124
Accumulated depreciation and depletion (125,906) (2,117,963)
Total oil and natural gas properties, net 7,337,518 9,154,161
Other property, plant and equipment, net 183,117 170,306
Total property, plant and equipment, net 7,520,635 9,324,467
NONCURRENT ASSETS
Operating lease assets, net of accumulated
depreciation 87,442 128,529
Long-term derivative instruments, net 6,987
Other noncurrent assets 7,748 4,845
Total noncurrent assets 102,177 133,374
TOTAL ASSETS $
7,956,338 $
9,856,214
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $
262,391 $
416,346
Revenue and severance taxes payable 170,661 154,556
Short-term derivative instruments, net 142,507 158,522
Current operating lease liabilities 33,748 61,198
Other current liabilities 3,915 5,002
Total current liabilities 613,222 795,624
NONCURRENT LIABILITIES
Long-term debt 3,122,853 2,182,832
Deferred tax liabilities 4,974 193,409
Operating lease liabilities 56,881 69,195
Payable pursuant to tax receivable
agreement - 70,529
Long-term derivative instruments, net 12,780
Asset retirement obligations 26,870 20,538
Financing lease liabilities 1,481 1,320
Other noncurrent liabilities 310 119
Total noncurrent liabilities 3,226,149 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, 378,408,302 shares
issued and 377,687,889 shares outstanding
at June 30, 2020 and 282,260,133 shares
issued and 281,241,443 shares outstanding
at December 31, 2019 3,784 2,822
Class B, $0.01 par value, 125,000,000
shares authorized, 35,101,316 and
35,420,258 shares issued and outstanding
at June 30, 2020 and December 31, 2019 351 355
Additional paid in capital 6,976,220 5,200,795
(Accumulated deficit) retained earnings (3,170,956) 570,889
Treasury stock, at cost, 720,413 shares
and 1,018,690 shares at June 30, 2020 and
December 31, 2019 (11,076) (17,428)
Total stockholders' equity 3,798,323 5,757,433
Noncontrolling interests 318,644 765,215
Total equity 4,116,967 6,522,648
TOTAL LIABILITIES AND EQUITY $
7,956,338 $
9,856,214
Parsley Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Six Months Ended June 30,
2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $
(4,125,625) $
106,991
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and
amortization 402,145 372,286
Leasehold abandonments and
impairments 556,512 22,189
Impairment of long-lived
assets 4,374,253
Accretion of asset retirement
obligations 917 698
Gain on sale of property (25)
Loss on early extinguishment
of debt 21,093
Stock-based compensation 17,778 10,298
Deferred income tax benefit (577,146) 24,835
Change in TRA liability (70,529)
(Gain) loss on derivatives (265,686) 100,126
Net cash received (paid) for
derivative settlements 143,596 (15,111)
Net cash received (paid) for
option premiums 48,886 (23,609)
Other 2,241 1,623
Changes in operating assets and liabilities, net
of acquisitions:
Accounts receivable 166,624 (13,417)
Accounts receivable-related
parties (4,081) (798)
Other current assets 970 7,245
Other noncurrent assets 1,812 (805)
Accounts payable and accrued
expenses (176,351) 18,465
Revenue and severance taxes
payable 16,105 4,866
Other noncurrent liabilities 191
Net cash provided by operating
activities 533,680 615,882
CASH FLOWS FROM INVESTING ACTIVITIES:
Development of oil and natural
gas properties (565,321) (737,194)
Acquisitions of oil and
natural gas properties (11,944) (24,591)
Cash acquired from the Jagged
Peak acquisition 53,347
Additions to other property
and equipment (3,162) (27,911)
Proceeds from sales of
property, plant and equipment 2,381 37,893
Other (2,488) 4,489
Net cash used in investing
activities (527,187) (747,314)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term
debt 1,285,000 352,000
Payments on long-term debt (1,244,600) (312,000)
Payments on financing lease
obligations (1,299) (1,430)
Debt issuance costs (11,777)
Repurchase of common stock (11,076) (5,652)
Dividends and distributions
paid (41,215)
Distributions to owners from
consolidated subsidiary - (603)
Net cash (used in) provided by
financing activities (24,967) 32,315
Net decrease in cash, cash
equivalents and restricted
cash (18,474) (99,117)
Cash, cash equivalents and
restricted cash at beginning
of period 20,739 163,216
Cash, cash equivalents and
restricted cash at end of
period $
2,265 $
64,099
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $
(76,409) $
(58,164)
Cash received for income taxes
$ $
240
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Asset retirement obligations
incurred, including changes
in estimate $
3,916 $
1,208
Additions to oil and natural
gas properties -change in
capital accruals $
(122,239) $
41,124
Common stock issued for oil
and natural gas properties $
1,776,199
$
Net premiums on options that
settled during the period $
(1,234) $
(19,748)
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDAX
Adjusted EBITDAX is not a measure of net (loss) income as determined by GAAP. Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by the Company's management and external users of the Company's consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDAX as net (loss) income before depreciation, depletion and amortization, exploration and abandonment costs, net interest expense, interest income, income tax expense, change in Tax Receivable Agreement ("TRA") liability, stock-based compensation, acquisition costs, impairment on long-lived assets, (gain) loss on early extinguishment of debt, gain on sale of property, rig termination costs, restructuring and other termination costs, accretion of asset retirement obligations, loss (gain) on derivatives, net settlements on derivative instruments, net premiums on options that settled during the period and other.
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) income 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
Six Months Ended
June 30,
June 30,
2020 2019 2020 2019
Adjusted EBITDAX reconciliation to net (loss) income attributable
to Parsley Energy, Inc. stockholders:
Net (loss) income attributable to Parsley Energy, Inc. stockholders $
(356,416) $
115,935 $
(3,722,816) $
91,871
Net (loss) income attributable to noncontrolling interests (33,113) 19,059 (402,809) 15,120
Depreciation, depletion and amortization 127,465 198,563 402,145 372,286
Exploration and abandonment costs 2,022 72 563,633 23,066
Interest expense, net 40,454 33,597 82,133 66,599
Interest income (20) (103) (269) (394)
Income tax expense (6,183) 32,625 (577,146) 24,835
EBITDAX (225,791) 399,748 (3,655,129) 593,383
Change in TRA liability - (70,529)
Stock-based compensation 6,638 4,976 13,028 10,298
Acquisition costs 593 15,018
Impairment on long-lived assets - 4,374,253
(Gain) loss on early extinguishment of debt (295) 21,093
Gain on sale of property (15) (25)
Rig termination costs 15,106 15,106
Restructuring and other termination costs 2,528 1,562 37,297 1,562
Accretion of asset retirement obligations 482 353 917 698
Loss (gain) on derivatives 280,006 (19,561) (265,686) 100,126
Net settlements on derivative instruments 121,979 (8,455) 182,528 (16,794)
Net premiums on options that settled during the period 11,770 (10,232) (1,234) (19,748)
Other (1,427) 2,142
Adjusted EBITDAX $
211,574 $
368,391 $
668,779 $
669,525
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, analysts and investors 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, without regard to the timing of settlement of either operating assets and liabilities or accounts payable related to capital expenditures. The Company believes that this measure, as so adjusted, presents a meaningful indicator of the Company's actual sources and uses of capital associated with its operations conducted during the applicable period. 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 June 30,
2020 2019
Net cash provided by
operating activities $
147,737 $
402,823
Net change in
operating assets and
liabilities, net of
acquisitions 27,389 (73,514)
Acquisition costs
related to the
acquisition of Jagged
Peak 593
Restructuring costs
related to the
acquisition of Jagged
Peak (excluding non-
cash) 2,528
Total discretionary
cash flow 178,247 329,309
Development of oil and
natural gas
properties (283,450) (384,544)
Additions to oil and
natural gas
properties -decrease
(increase) in capital
accruals 219,132 12,530
Total accrual-based
development capital
expenditures (64,318) (372,014)
Free cash flow
(outspend) $
113,929 $
(42,705)
Adjusted Net Income
Adjusted net income is not a measure of net (loss) 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 loss (gain) on derivatives, net settlements on derivative instruments, net premiums on options that settled during the period, gain on sale of property, rig termination costs, restructuring and other termination costs, exploration and abandonment costs, impairment of long-lived assets, acquisition costs, change in TRA liability, (gain) loss on early extinguishment of debt, and other, 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 (loss) income, 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) 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)
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Net (loss) income attributable to Parsley Energy, Inc. stockholders $
(356,416) $
115,935 $
(3,722,816) $
91,871
Adjustments:
Loss (gain) on derivatives 280,006 (19,561) (265,686) 100,126
Net settlements on derivative instruments 121,979 (8,455) 182,528 (16,794)
Net premiums on options that settled during the period 11,770 (10,232) (1,234) (19,748)
Gain on sale of property (15) (25)
Rig termination costs 15,106 15,106
Restructuring and other termination costs 2,528 1,562 37,297 1,562
Exploration and abandonment costs 2,022 72 563,633 23,066
Impairment of long-lived assets - 4,374,253
Acquisition costs 593 15,018
Change in TRA liability - (70,529)
(Gain) loss on early extinguishment of debt (295) 21,093
Other (1,427) 2,142
Change in noncontrolling interests (36,223) 4,102 (417,925) (10,220)
Income taxes on above adjustments(1) (29,532) 7,023 (332,293) (17,240)
Adjustment to deferred tax asset valuation allowance(2) - (284,727)
Adjusted net income $
10,096 $
90,446 $
115,835 $
152,623
Net (loss) income per diluted share - as reported(1) $
(0.95) $
0.41 $
(10.02) $
0.33
Adjustments:
Loss (gain) on derivatives $
0.74 $
(0.06) $
(0.71) $
0.36
Net settlements on derivative instruments 0.32 (0.03) 0.49 (0.06)
Net premiums on options that settled during the period 0.03 (0.04) (0.07)
Gain on sale of property -
Rig termination costs 0.04 0.04
Restructuring and other termination costs 0.01 0.01 0.10 0.01
Exploration and abandonment costs 0.01 1.52 0.08
Impairment of long-lived assets - 11.76
Acquisition costs - 0.04
Change in TRA liability - (0.19)
(Gain) loss on early extinguishment of debt - 0.06
Other - 0.01
Change in noncontrolling interests (0.10) 0.01 (1.12) (0.03)
Income taxes on above adjustments (0.07) 0.02 (0.90) (0.07)
Adjustment to deferred tax asset valuation allowance - (0.77)
Adjusted net income per diluted share
(4) $
0.03 $
0.32 $
0.31 $
0.55
Basic weighted average shares outstanding - as reported(3) 376,950 279,706 371,507 279,253
Effect of dilutive securities:
Class B Common Stock -
Restricted Stock and Restricted Stock Units - 62 110
Diluted weighted average shares outstanding - as reported(3) 376,950 279,768 371,507 279,363
Effect of dilutive securities:
Class B Common Stock -
Restricted Stock and Restricted Stock Units 520 422
Diluted weighted average shares outstanding for adjusted net income(4) 377,470 279,768 371,929 279,363
(1) The assumed
income tax
rate is 23%
and 19% for
the three
and six
months ended
June 30,
2020 and
2019,
respectively.
(2) Deferred tax
valuation
allowance
has been
adjusted to
reflect the
assumed
income tax
rate of 23%.
(3) For the three
and six
months ended
June 30,
2020, 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.
For the
three and
six months
ended June
30, 2019,
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 the
effect would
have been
antidilutive.
(4) For purposes
of
calculating
adjusted net
income per
diluted
share for
the three
and six
months ended
June 30,
2020 and
2019, Class
B Common
Stock was
not
recognized
because the
shares would
have been
antidilutive
using the
"if
converted"
method.
Open Derivatives Position
---
Parsley Energy, Inc. and Subsidiaries
Open Crude Oil Derivatives Positions(1)
3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
CUSHING
Swaps - Cushing (MBbls/d)(2) 11.0 11.0
Swap Price ($/Bbl) $
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
Two Way Collars - Midland (MBbls/d)(4) 6.5 6.5
Short Call Price ($/Bbl) $
48.00 $
48.00
Long Put Price ($/Bbl) $
43.00 $
43.00
Swaps - Midland (MBbls/d)(2) 12.5 3.3 5.0 5.0 5.0 5.0
Swap Price ($/Bbl) $
29.69 $
32.60 $
40.50 $
40.50 $
40.50 $
40.50
MAGELLAN EAST HOUSTON ("MEH")
Three Way Collars - MEH (MBbls/d)(3) 10.8 24.1 13.3 13.2 2.4 2.4
Short Call Price ($/Bbl) $
55.00 $
51.22 $
64.38 $
64.38 $
55.00 $
55.00
Long Put Price ($/Bbl) $
40.00 $
37.23 $
53.13 $
53.13 $
40.00 $
40.00
Short Put Price ($/Bbl) $
30.00 $
27.23 $
43.13 $
43.13 $
30.00 $
30.00
Put Spreads - MEH (MBbls/d)(5) 17.9 17.9
Long Put Price ($/Bbl) $
40.00 $
40.00
Short Put Price ($/Bbl) $
30.00 $
30.00
Swaps - MEH (MBbls/d)(2) 29.0 15.7 52.0 52.0 52.0 52.0 20.0
Swap Price ($/Bbl) $
35.24 $
39.28 $
40.74 $
40.74 $
40.74 $
40.74 $
43.81
BRENT
Two Way Collars - Brent (MBbls/d)(4) 6.5 6.5
Short Call Price ($/Bbl) $
52.30 $
52.30
Long Put Price ($/Bbl) $
47.30 $
47.30
Swaps - Brent (MBbls/d)(2) 11.2 6.3 22.0 22.0 22.0 22.0
Swap Price ($/Bbl) $
41.77 $
47.40 $
44.46 $
44.46 $
44.46 $
44.46
Total Hedged Volumes (MBbls/d) 110.0 105.1 92.3 92.2 81.4 81.4 20.0
Premium Realization ($MM)(6) $
7.2 $
7.2 $
(2.0) $
(2.0) $
(0.7) $
(0.7)
Midland-Cushing Basis Swaps (MBbls/d)(7) 14.0 14.0
Basis Differential ($/Bbl) $
(1.44) $
(1.44)
Rollfactor Swaps (MBbls/d)(8) 45.7 45.7
Swap Price ($/Bbl) $
(2.32) $
(2.32)
Parsley Energy, Inc. and Subsidiaries
Open Natural Gas Derivatives Positions(1)
3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
WA HA
Swaps - Waha (MMBtu/d)(2) 51,413 58,152 66,667 66,484 66,304 66,304
Swap Price ($/MMBtu) $
0.96 $
1.04 $
2.23 $
2.23 $
2.23 $
2.23
(1) Hedge
position as
of 8/4/2020.
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
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.
(5) 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.
(6) Premium
realizations
represent
net premiums
paid
(including
deferred
premiums),
which are
recognized
as income or
loss in the
period of
settlement.
(7) 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.
(8) 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.
Weighted Average Shares Outstanding
---
Parsley Energy, Inc. and Subsidiaries
Weighted Average Shares Outstanding
(Unaudited, in thousands)
Three Months Ended June 30,
2020 2019
Weighted
average
common
shares
outstanding,
class A 376,950 279,706
Weighted
average
common
shares
outstanding,
class B 35,125 35,722
Adjusted
weighted
average
common
shares
outstanding(1) 412,075 315,428
(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.
Excludes
potentially
dilutive
restricted
stock and
restricted
stock units
of
approximately
0.5 million
and 0.1
million
shares for
the three
months ended
June 30, 2020
and 2019,
respectively.
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SOURCE Parsley Energy, Inc.
