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Parsley Energy (PE) Up 7.9% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Parsley Energy (PE). Shares have added about 7.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Parsley Energy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Parsley Puts up a Stellar Q2 Show

Parsley Energy posted adjusted net earnings per share of 32 cents, beating the Zacks Consensus Estimate by a penny. Higher-than-expected production led to the outperformance. Precisely, average output came in at 140.1 thousand barrels of oil equivalent per day (Mboe/d), surpassing the Zacks Consensus Estimate of 131 Mboe/d. However, the bottom line declined from 39 cents per share recorded in second-quarter 2018 amid weaker y/y commodity price realizations. 

Parsley’s total revenues in the quarter under review amounted to $498.5 million, increasing from $467.8 million a year ago. Further, the top line surpassed the Zacks Consensus Estimate of $468 million.


Production Stats and Realized Prices (Excluding Derivatives Impact)

Parsley's average quarterly volume increased 11.6% year over year to 140.1 thousand barrels of oil equivalent per day — comprising 83% liquids — on the back of rising production of oil, natural gas and natural gas liquids (NGLs). In the quarter under review, the company placed 39 gross horizontal wells on production.

Average realized oil price declined 9.4% from the year-ago quarter to $58.23 per barrel and natural gas price realization decreased 99.2% to $0.01 per thousand cubic feet. Realized price for NGLs in the quarter was $14.18 per barrel, lower than the year-ago level of $27.20. Overall, the company fetched $39.01 per barrel compared with $47.48 a year ago.

Total Expenses

Total operating expenses rose to $317.7 million from the year-ago figure of $252.3 million. Lease operating costs rose to $42.7 million in the quarter under review from the year-ago period’s $36 million. Depreciation costs also increased to $198.6 million in second-quarter 2019 from $145.5 million in the corresponding quarter of last year. Transportation, production and restructuring expenses drove total costs in the quarter.

Capex & Balance Sheet

During the quarter under review, capital expenditure totaled $372 million, of which 78% was allotted to drilling and completion activities, and the remaining was spent on facilities and infrastructure.  

As of Jun 30, Parsley had cash and cash equivalents of $64 million. Its long-term debt totaled around $2,221.4 million, representing a debt-to-capitalization ratio of 26%.

Guidance

On a positive note, Parsley has tightened capital budget, while increasing its output guidance. The company expects 2019 capital expenditure in the range of $1,400-$1,490 million versus prior forecast of $1,350-$1,550 million. Full-year 2019 lease operating expenses per Boe has been revised from $3.50-$4.50 to $3.40-$3.90. Parsley has also lowered full-year forecast of general and administrative costs per Boe. 

Total production is now expected in the band of 134,000-139,000 Boe/d versus prior forecast of 124,000-134,000 Boe/d. Full-year oil production is anticipated in the band of 85-86.5 thousand barrels per day versus earlier estimate of 80-85 thousand barrels. The company expects third-quarter oil output to average 87-90 thousand barrels per day.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Parsley Energy has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Parsley Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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