Parsley Energy Announces Third Quarter 2020 Financial And Operating Results
AUSTIN, Texas, Oct. 28, 2020 /PRNewswire/ -- Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today announced financial and operating results for the quarter ended September 30, 2020.
Recent Highlights
-- Generated positive free cash flow((1)) in 3Q20.
-- Paid 3Q20 quarterly dividend of $0.05 per share on September 18, 2020
and declared 4Q20 quarterly dividend of $0.05 per share((2)) payable on
December 18, 2020.
-- 3Q20 net oil production decreased 1% quarter-over-quarter and increased
21% year-over-year to 111.0 MBo per day. Total 3Q20 net production
averaged 183.2 MBoe per day.
-- Recently announced a definitive merger agreement to be acquired by
Pioneer Natural Resources Company ("Pioneer") in an all-stock
transaction valued at approximately $7.6 billion, inclusive of assumed
debt, expected to close in 1Q21.
Operational Update
During the third quarter of 2020, the Company placed on production 26 gross operated horizontal wells. Parsley's average working interest on wells placed on production was approximately 88%, with an average completed lateral length of approximately 9,700 feet. The Company placed on production 15 gross operated horizontal wells in the Midland Basin, with the remainder placed on production in the Delaware Basin.
After reactivating development activity in July, Parsley delivered steady improvements in drilling and completion efficiency((3)) within each basin. Notably, in the Delaware Basin, Parsley drilled its first two three-mile lateral wells in under 29 days each, which helped drive a new Company-record for Delaware drilling efficiency in 3Q20. Parsley attributes these recent drilling efficiency gains to enhancements made to the Company's remote operational command center during the activity shutdown in May and June. As operational efficiency gains take hold, the Company is delivering leading edge well costs below $850 per foot in the Delaware Basin.
In line with prior Company commentary, Parsley deployed two additional rigs in late October, bringing the current number of active operated rigs to four. The Company expects to continue operating four rigs and one-to-two frac spreads for the remainder of 2020.
Financial Update
Profitability
During 3Q20, the Company recorded net income attributable to its stockholders of $22.6 million, or $0.06 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 3Q20 was $82.6 million, or $0.22 per share.((1))
Adjusted earnings before interest, income taxes, depreciation, depletion, amortization, and exploration expense ("Adjusted EBITDAX") for 3Q20 was $290.2 million.((1) )
Realized Pricing
During 3Q20, Parsley reported an average unhedged oil price realization of $37.19 per Bbl net of transportation costs, representing a discount of $3.73 to the average WTI Cushing price((4)) for the quarter.
Operating Costs
During the third quarter of 2020, the Company reported lease operating expense ("LOE") per Boe of $3.19, down 14% versus 2Q20 expense levels despite stable production volumes. Favorable LOE unit cost trends were driven by supplier price reductions and continued utilization of the Company's integrated water handling system.
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 to $1.97 and $1.59, respectively. Encouraging G&A cost trends are a function of ongoing corporate cost savings initiatives.
Capital Expenditures
Parsley reported capital expenditures of $85 million during the third quarter of 2020, comprised of $84 million for operated drilling, completion, and equipment activity, and $1 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 December 18, 2020, to shareholders of record on December 8, 2020.
Liquidity and Hedging
The Company entered into an amendment to its revolving credit agreement on October 19, 2020, which reaffirmed its borrowing base at $2.7 billion and increased the elected commitment amount from $1.075 billion to $1.1 billion.
As of September 30, 2020, Parsley had approximately $767.7 million of liquidity, consisting of $4.7 million of cash and cash equivalents and an availability of $763.0 million on the Company's revolver.((5))
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 September 30, 2020.
Guidance
In light of Parsley's recent entry into a definitive merger agreement with Pioneer, Parsley has discontinued providing guidance and long-term outlook information regarding its results of operations. Further, Parsley does not intend to update previously issued guidance and long-term outlook information, including the guidance provided in the Company's presentation posted to its website on September 8, 2020. Accordingly, investors are cautioned not to rely on historical forward-looking statements regarding guidance and long-term outlook information, as those forward-looking statements were the estimates of management only as of the date provided, have not and will not be updated and were subject to the specific risks and uncertainties that accompanied such forward-looking statements.
Conference Call Information
Parsley Energy will host a brief conference call and webcast to discuss its results for the third quarter of 2020 on Thursday, October 29, 2020 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). This conference call and webcast will not include a question and answer session. 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 November 5, 2020 by dialing 877-660-6853 (United States/Canada) or 201-612-7415 (International). Conference ID: 13710926. A live broadcast will also be available on the Internet at www.parsleyenergy.com under the "Investors-Events & Presentations" section of the website.
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.
Investor Contacts:
Kyle Rhodes
Vice President - Investor Relations
or
Dan Guill
Investor Relations Analyst
ir@parsleyenergy.com
(512) 505-5199
Media and Public Affairs Contacts:
Kate Zaykowski
Manager - Public Affairs and Corporate Communications
media@parsleyenergy.com
(512) 220-7100
- Tables to Follow -
(1) "Cash based G&A per
Boe", "Adjusted
EBITDAX", "free cash
flow", 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, and adjusted net
income to GAAP
financial measures,
please see the tables
and associated
commentary below under
Reconciliation of Non-
GAAP Financial
Measures.
(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) "Drilling efficiency" is
measured based on
drilled feet per
operational day.
"Completion efficiency"
is measured based on
stimulated lateral
length per operational
day. "Operational days"
are measured as days
equipment is active and
do not include
mobilization or other
idle time.
(4) Represents Bloomberg-
sourced 3Q20 average
WTI Cushing price.
(5) Revolver availability is
net of letters of
credit.
Parsley Energy, Inc. and Subsidiaries
Selected Operating Data
(Unaudited)
Three Months Ended
September 30, 2020 June 30, 2020 September 30, 2019
---
Net production volumes:
Oil (MBbls) 10,213 10,242 8,440
Natural gas (MMcf) 18,371 16,949 14,475
Natural gas liquids
(MBbls) 3,581 3,600 2,983
Total (MBoe) 16,856 16,667 13,836
Average daily net
production (Boe/d) 183,217 183,154 150,391
Average sales prices(1) :
Oil, without realized
derivatives (per Bbl) $
37.19 $
18.30 $
55.16
Oil, with realized
derivatives (per Bbl) $
35.73 $
31.47 $
54.12
Natural gas, without
realized derivatives
(per Mcf) $
1.02 $
0.71 $
0.59
Natural gas, with
realized derivatives
(per Mcf) $
0.92 $
0.65 $
0.64
Natural gas liquids (per
Bbl) $
12.87 $
5.10 $
11.08
Average price per Boe,
without realized
derivatives $
26.38 $
13.07 $
36.65
Average price per Boe,
with realized
derivatives $
25.38 $
21.10 $
36.07
Average costs (per Boe):
Lease operating expenses $
3.19 $
3.69 $
3.30
Transportation and
processing costs $
1.32 $
0.87 $
0.87
Production and ad valorem
taxes $
1.88 $
1.40 $
2.76
Depreciation, depletion
and amortization $
7.60 $
7.65 $
15.30
General and
administrative expenses
(including stock-based
compensation) $
1.97 $
2.21 $
2.65
General and
administrative expenses
(cash based) $
1.59 $
1.81 $
2.28
(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
Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
---
REVENUES
Oil sales $
379,804 $
465,549 $
1,089,423 $
1,292,563
Natural gas sales 18,729 8,566 35,966 23,159
Natural gas liquids sales 46,095 33,041 96,894 115,138
Other 2,761 2,995 10,119 5,503
Total revenues 447,389 510,151 1,232,402 1,436,363
OPERATING EXPENSES
Lease operating expenses 53,696 45,719 188,853 129,587
Transportation and processing costs 22,182 12,052 50,942 26,917
Production and ad valorem taxes 31,709 38,235 92,254 96,386
Depreciation, depletion and
amortization 128,045 211,737 530,190 584,023
General and administrative expenses
(including stock-based
compensation) 33,282 36,718 106,052 109,662
Exploration and abandonment costs 7,983 11,988 571,616 35,054
Impairment - 4,374,253
Acquisition costs 278 15,296
Accretion of asset retirement
obligations 497 373 1,414 1,071
Rig termination costs (202) 14,904
Loss (gain) on sale of property 357 (1,887) 332 (1,887)
Restructuring and other termination
costs 8,134 45,431 1,562
Other operating expenses 5,202 2,175 16,802 3,563
Total operating expenses 291,163 357,110 6,008,339 985,938
OPERATING INCOME (LOSS) 156,226 153,041 (4,775,937) 450,425
OTHER INCOME (EXPENSE)
Interest expense, net (40,456) (33,578) (122,589) (100,177)
Gain (loss) on early extinguishment
of debt 56 (21,037)
(Loss) gain on derivatives (87,021) 56,552 178,665 (43,574)
Change in TRA liability - 70,529
Interest income 16 216 285 610
Other expense (928) (1,678) (4,794) (905)
Total other (expense) income, net (128,333) 21,512 101,059 (144,046)
INCOME (LOSS) BEFORE INCOME TAXES 27,893 174,553 (4,674,878) 306,379
INCOME TAX (EXPENSE) BENEFIT (3,129) (34,953) 574,017 (59,788)
NET INCOME (LOSS) 24,764 139,600 (4,100,861) 246,591
LESS: NET (INCOME) LOSS
ATTRIBUTABLE TO NONCONTROLLING
INTERESTS (2,125) (19,890) 400,684 (35,010)
NET INCOME (LOSS) ATTRIBUTABLE TO
PARSLEY ENERGY, INC. STOCKHOLDERS $
22,639 $
119,710 $
(3,700,177) $
211,581
Net income (loss) per common share:
Basic $
0.06 $
0.43 $
(9.91) $
0.76
Diluted $
0.06 $
0.43 $
(9.91) $
0.76
Weighted average common shares outstanding:
Basic 377,452 279,961 373,503 279,491
Diluted 378,160 280,547 373,503 279,954
Parsley Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
September 30, 2020 December 31, 2019
---
ASSETS
CURRENT ASSETS
Cash and cash equivalents $
4,662 $
20,739
Accounts receivable, net of allowance for doubtful accounts:
Joint interest owners and other 30,582 48,785
Oil, natural gas and natural gas liquids 141,720 192,216
Related parties 188 183
Short-term derivative instruments, net 81,280 127,632
Other current assets 11,461 8,818
Total current assets 269,893 398,373
PROPERTY, PLANT AND EQUIPMENT
Oil and natural gas properties, successful
efforts method 7,533,203 11,272,124
Accumulated depreciation and depletion (249,704) (2,117,963)
Total oil and natural gas properties, net 7,283,499 9,154,161
Other property, plant and equipment, net 195,449 170,306
Total property, plant and equipment, net 7,478,948 9,324,467
NONCURRENT ASSETS
Operating lease assets, net of accumulated
depreciation 85,867 128,529
Long-term derivative instruments, net 3,239
Other noncurrent assets 6,989 4,845
Total noncurrent assets 96,095 133,374
TOTAL ASSETS $
7,844,936 $
9,856,214
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $
280,055 $
416,346
Revenue and severance taxes payable 176,618 154,556
Short-term derivative instruments, net 107,725 158,522
Current operating lease liabilities 40,029 61,198
Other current liabilities 3,886 5,002
Total current liabilities 608,313 795,624
NONCURRENT LIABILITIES
Long-term debt 2,996,015 2,182,832
Deferred tax liabilities 8,581 193,409
Operating lease liabilities 50,259 69,195
Payable pursuant to tax receivable
agreement - 70,529
Long-term derivative instruments, net 24,621
Asset retirement obligations 27,622 20,538
Financing lease liabilities 1,670 1,320
Other noncurrent liabilities 428 119
Total noncurrent liabilities 3,109,196 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, 379,339,004 shares
issued and 378,610,172 shares outstanding
at September 30, 2020 and 282,260,133
shares issued and 281,241,443 shares
outstanding at December 31, 2019 3,793 2,822
Class B, $0.01 par value, 125,000,000
shares authorized, 34,201,316 and
35,420,258 shares issued and outstanding
at September 30, 2020 and December 31,
2019 342 355
Additional paid in capital 6,971,249 5,200,795
(Accumulated deficit) retained earnings (3,148,317) 570,889
Treasury stock, at cost, 728,832 shares and
1,018,690 shares at September 30, 2020 and
December 31, 2019 (11,165) (17,428)
Total stockholders' equity 3,815,902 5,757,433
Noncontrolling interests 311,525 765,215
Total equity 4,127,427 6,522,648
TOTAL LIABILITIES AND EQUITY $
7,844,936 $
9,856,214
Parsley Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Three Months Ended September 30, Nine Months Ended September 30,
---
2020 2019 2020 2019
---
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $
24,764 $
139,600 $
(4,100,861) $
246,591
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and
amortization 128,045 211,737 530,190 584,023
Leasehold abandonments and
impairments 7,933 11,885 564,445 34,074
Impairment of long-lived
assets - 4,374,253
Accretion of asset retirement
obligations 497 373 1,414 1,071
Loss (gain) on sale of
property 357 (1,887) 332 (1,887)
(Gain) loss on early
extinguishment of debt (56) 21,037
Stock-based compensation 6,564 5,175 24,342 15,473
Deferred income tax expense
(benefit) 3,129 34,953 (574,017) 59,788
Change in TRA liability - (70,529)
Loss (gain) on derivatives 87,021 (56,552) (178,665) 43,574
Net cash (paid) received for
derivative settlements (10,780) 2,023 132,816 (13,088)
Net cash (paid) received for
option premiums (6,128) (11,712) 42,758 (35,321)
Other 699 3,517 2,940 5,140
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (21,386) (30,727) 145,238 (44,144)
Accounts receivable-related
parties 4,076 511 (5) (287)
Other current assets (5,067) (2,183) (4,097) 5,062
Other noncurrent assets 820 531 2,632 (274)
Accounts payable and accrued
expenses 823 14,838 (175,528) 33,303
Revenue and severance taxes
payable 5,957 3,277 22,062 8,143
Other noncurrent liabilities 118 59 309 59
Net cash provided by operating
activities 227,386 325,418 761,066 941,300
CASH FLOWS FROM INVESTING ACTIVITIES:
Development of oil and natural
gas properties (65,532) (343,988) (630,853) (1,081,182)
Acquisitions of oil and
natural gas properties (2,400) (9,250) (14,344) (33,841)
Cash acquired from the Jagged
Peak acquisition - 53,347
Additions to other property
and equipment (8,976) (244) (12,138) (28,155)
Proceeds from sales of
property, plant and equipment 308 3,074 2,689 40,967
Other 6 732 (2,482) 5,221
Net cash used in investing
activities (76,594) (349,676) (603,781) (1,096,990)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term
debt 136,000 175,000 1,421,000 462,000
Payments on long-term debt (262,934) (200,000) (1,507,534) (447,000)
Payments on financing lease
obligations (642) (696) (1,941) (2,126)
Debt issuance costs (120) (11,897)
Repurchase of common stock (89) (20) (11,165) (5,672)
Dividends and distributions
paid (20,610) (9,465) (61,825) (9,465)
Distributions to owners from
consolidated subsidiary - (603)
Net cash used in financing
activities (148,395) (35,181) (173,362) (2,866)
Net increase (decrease) in
cash, cash equivalents and
restricted cash 2,397 (59,439) (16,077) (158,556)
Cash, cash equivalents and
restricted cash at beginning
of period 2,265 64,099 20,739 163,216
Cash, cash equivalents and
restricted cash at end of
period $
4,662 $
4,660 $
4,662 $
4,660
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $
(41,600) $
(13,610) $
(118,009) $
(71,774)
Cash received for income taxes
$
$
$ $
240
SUPPLEMENTAL DISCLOSURE OF NON-CASH
ACTIVITIES:
Asset retirement obligations
incurred, including changes
in estimate $
532 $
411 $
4,448 $
1,619
Additions to oil and natural
gas properties -change in
capital accruals $
19,367 $
(25,695) $
(102,872) $
15,429
Common stock issued for oil
and natural gas properties
$
$ $
1,776,199
$
Net premiums on options that
settled during the period $
7,156 $
(11,765) $
5,922 $
(31,513)
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDAX
Adjusted EBITDAX is not a measure of net income (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 income (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, (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 income (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
Nine Months Ended
September 30,
September 30,
---
2020 2019 2020 2019
---
Adjusted EBITDAX reconciliation to net
income (loss) attributable to Parsley
Energy, Inc. stockholders:
Net income (loss)
attributable to
Parsley Energy, Inc.
stockholders $
22,639 $
119,710 $
(3,700,177) $
211,581
Net income (loss)
attributable to
noncontrolling
interests 2,125 19,890 (400,684) 35,010
Depreciation,
depletion and
amortization 128,045 211,737 530,190 584,023
Exploration and
abandonment costs 7,983 11,988 571,616 35,054
Interest expense, net 40,456 33,578 122,589 100,177
Interest income (16) (216) (285) (610)
Income tax expense 3,129 34,953 (574,017) 59,788
EBITDAX 204,361 431,640 (3,450,768) 1,025,023
Change in TRA
liability - (70,529)
Stock-based
compensation 6,564 5,175 19,592 15,473
Acquisition costs 278 15,296
Impairment on long-
lived assets - 4,374,253
(Gain) loss on early
extinguishment of
debt (56) 21,037
Gain on sale of
property 357 (1,887) 332 (1,887)
Rig termination costs (202) 14,904
Restructuring and
other termination
costs 8,134 45,431 1,562
Accretion of asset
retirement
obligations 497 373 1,414 1,071
Loss (gain) on
derivatives 87,021 (56,552) (178,665) 43,574
Net settlements on
derivative
instruments (23,900) 3,686 158,628 (13,108)
Net premiums on
options that settled
during the period 7,156 (11,765) 5,922 (31,513)
Other - 2,142
Adjusted EBITDAX $
290,210 $
370,670 $
958,989 $
1,040,195
Free Cash Flow
Free cash flow is not a measure of net cash provided by operating activities as determined by GAAP. Free cash flow 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, 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 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 calculation of free cash flow were computed in accordance with GAAP.
Free 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 free cash flow to the GAAP financial measure of net cash provided by operating activities.
Parsley Energy, Inc. and Subsidiaries
Free Cash Flow
(Unaudited, in thousands)
Three Months Ended September 30,
2020 2019
---
Net cash provided by
operating activities $
227,386 $
325,418
Net change in
operating assets and
liabilities, net of
acquisitions 14,659 13,694
Acquisition costs
related to the
acquisition of Jagged
Peak 278
Restructuring costs
related to the
acquisition of Jagged
Peak (excluding non-
cash) 58
Total discretionary
cash flow 242,381 339,112
Development of oil and
natural gas
properties (65,532) (343,988)
Additions to oil and
natural gas
properties -
(increase) decrease
in capital accruals (19,367) 25,695
Total accrual-based
development capital
expenditures (84,899) (318,293)
Free cash flow $
157,482 $
20,819
Adjusted Net Income
Adjusted net income is not a measure of net income (loss) 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, loss (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 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 income (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 Nine Months Ended
September 30, September 30,
---
2020 2019 2020 2019
---
Net income (loss)
attributable to Parsley
Energy, Inc. stockholders $
22,639 $
119,710 $
(3,700,177) $
211,581
Adjustments:
Loss (gain) on derivatives 87,021 (56,552) (178,665) 43,574
Net settlements on
derivative instruments (23,900) 3,686 158,628 (13,108)
Net premiums on options
that settled during the
period 7,156 (11,765) 5,923 (31,513)
Loss (gain) on sale of
property 357 (1,887) 332 (1,887)
Rig termination costs (202) 14,904
Restructuring and other
termination costs 8,134 45,431 1,562
Exploration and
abandonment costs 7,983 11,988 571,616 35,054
Impairment of long-lived
assets - 4,374,253
Acquisition costs 278 15,296
Change in TRA liability - (70,529)
(Gain) loss on early
extinguishment of debt (56) 21,037
Other - 2,142
Change in noncontrolling
interests (7,473) 6,106 (425,398) (4,113)
Income taxes on above
adjustments(1) (19,336) 10,675 (351,629) (6,565)
Adjustment to deferred tax
asset valuation
allowance(2) - (284,727)
Adjusted net income $
82,601 $
81,961 $
198,437 $
234,585
Net income (loss) per
diluted share -as
reported(1) $
0.06 $
0.43 $
(9.91) $
0.76
Adjustments:
Loss (gain) on derivatives $
0.23 $
(0.20) $
(0.48) $
0.16
Net settlements on
derivative instruments (0.06) 0.01 0.42 (0.05)
Net premiums on options
that settled during the
period 0.02 (0.04) 0.02 (0.11)
Loss (gain) on sale of
property - (0.01) (0.01)
Rig termination costs - 0.04
Restructuring and other
termination costs 0.02 0.12 0.01
Exploration and
abandonment costs 0.02 0.04 1.53 0.13
Impairment of long-lived
assets - 11.70
Acquisition costs - 0.04
Change in TRA liability - (0.19)
Loss on early
extinguishment of debt - 0.06
Other - 0.01
Change in noncontrolling
interests (0.02) 0.02 (1.14) (0.01)
Income taxes on above
adjustments (0.05) 0.04 (0.93) (0.04)
Adjustment to deferred tax
asset valuation allowance - (0.76)
Adjusted net income per
diluted share
(4) $
0.22 $
0.29 $
0.53 $
0.84
Basic weighted average
shares outstanding -as
reported(3) 377,452 279,961 373,503 279,491
Effect of dilutive securities:
Class B Common Stock -
Restricted Stock and
Restricted Stock Units 708 586 463
Diluted weighted average
shares outstanding -as
reported(3) 378,160 280,547 373,503 279,954
Effect of dilutive securities:
Class B Common Stock -
Restricted Stock and
Restricted Stock Units - 304
Diluted weighted average
shares outstanding for
adjusted net income(4) 378,160 280,547 373,807 279,954
(1) The assumed income tax
rate is 22% and 20% for
the three and nine
months ended September
30, 2020 and 2019,
respectively.
(2) Deferred tax valuation
allowance has been
adjusted to reflect the
assumed income tax rate
of 22%.
(3) For the three and nine
months ended September
30, 2020 and the nine
months ended September
30, 2019, the number of
weighted average
diluted shares used to
calculate actual net
income (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
nine months ended
September 30, 2019,
the number of weighted
average diluted shares
used to calculate
actual net income
(loss) 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
nine months ended
September 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)
4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
---
CUSHING
Swaps -Cushing
(MBbls/d)(2) 11.0
Swap Price ($/Bbl) $
57.87
MIDLAND
Three Way Collars -
Midland (MBbls/d)(3) 13.8
Short Call Price
($/Bbl) $
51.65
Long Put Price ($/Bbl) $
35.66
Short Put Price
($/Bbl) $
25.66
Two Way Collars -
Midland (MBbls/d)(4) 6.5
Short Call Price
($/Bbl) $
48.00
Long Put Price ($/Bbl) $
43.00
Swaps -Midland
(MBbls/d)(2) 3.3 5.0 5.0 5.0 5.0
Swap Price ($/Bbl) $
32.60 $
40.50 $
40.50 $
40.50 $
40.50
MAGELLAN EAST HOUSTON ("MEH")
Three Way Collars -
MEH (MBbls/d)(3) 24.1 20.3 20.2 9.4 9.4
Short Call Price
($/Bbl) $
51.22 $
59.43 $
59.39 $
51.29 $
51.29
Long Put Price ($/Bbl) $
37.23 $
49.32 $
49.30 $
41.55 $
41.55
Short Put Price
($/Bbl) $
27.23 $
39.32 $
39.30 $
31.55 $
31.55
Put Spreads -MEH
(MBbls/d)(5) 17.9
Long Put Price ($/Bbl) $
40.00
Short Put Price
($/Bbl) $
30.00
Swaps -MEH (MBbls/
d)(2) 15.7 45.0 45.0 45.0 45.0 20.0
Swap Price ($/Bbl) $
39.28 $
40.54 $
40.54 $
40.54 $
40.54 $
43.81
BRENT
Two Way Collars -
Brent (MBbls/d)(4) 6.5
Short Call Price
($/Bbl) $
52.30
Long Put Price ($/Bbl) $
47.30
Swaps -Brent (MBbls/
d)(2) 6.3 22.0 22.0 22.0 22.0
Swap Price ($/Bbl) $
47.40 $
44.46 $
44.46 $
44.46 $
44.46
Total Hedged Volumes
(MBbls/d) 105.1 92.3 92.2 81.4 81.4 20.0
Premium Realization
($MM)(6) $
7.2 $
(2.6) $
(2.6) $
(1.4) $
(1.4)
Midland-Cushing Basis
Swaps (MBbls/d)(7) 14.0
Basis Differential
($/Bbl) $
(1.44)
Rollfactor Swaps
(MBbls/d)(8) 52.2 10.0
Swap Price ($/Bbl) $
(2.09) $
(0.45)
Parsley Energy, Inc. and Subsidiaries
Open Natural Gas Derivatives Positions(1)
4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
---
WAHA
Swaps -Waha (MMBtu/d)(2) 78,152 116,667 116,484 116,304 116,304 20,000
Swap Price ($/MMBtu) $
1.40 $
2.36 $
2.36 $
2.36 $
2.36 $
2.46
(1) Hedge position as of
10/27/2020. 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 September 30,
2020 2019
Weighted
average
common
shares
outstanding,
class
A 377,452 279,961
Weighted
average
common
shares
outstanding,
class
B 34,681 35,519
Adjusted
weighted
average
common
shares
outstanding(1) 412,133 315,480
(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 0.7
million and 0.6 million
shares for the three
months ended September
30, 2020 and 2019,
respectively.
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SOURCE Parsley Energy, Inc.
