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Parsley's (PE) Q4 Earnings Miss on Low Price Realizations

Zacks Equity Research
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Parsley Energy, Inc. PE recently reported fourth-quarter 2018 adjusted net earnings per share of 30 cents, which was in line with the year-ago level but lagged the Zacks Consensus Estimate of 34 cents. The underperformance of this Permian producer stemmed from weak commodity prices and high costs during the quarter. 


Other Permian-focused players like Concho Resources, Inc. CXO, Diamondback Energy, Inc. FANG and Devon Energy Corporation DVN also failed to beat earnings estimates in the fourth quarter amid lower price realizations. 


Parsley’s total revenues in the fourth quarter amounted to $454.9 million, increasing from $311.5 million a year ago. However, the top line missed the Zacks Consensus Estimate of $444.9 million.


Production Growth


Parsley's average quarterly volume increased 49.2% year over year to 119.8 thousand barrels of oil equivalent per day — comprising 85.3% liquids — on the back of rising production of oil, natural gas and natural gas liquids (NGLs). In the quarter under review, the company put 43 gross horizontal wells in production.


Price Realizations (Excluding Derivatives Impact)


Average realized oil price moved up 0.5% from the year-ago quarter to $54.22 per barrel, while average natural gas price realization decreased 58.1% to $0.90 per thousand cubic feet. Realized price for NGLs in the quarter was $25 per barrel, lower than the year-ago level of $26.84. Overall, the company fetched $40.91 per barrel compared with $41.94 a year ago.


Total Expenses


Total operating expenses rose to $432.7 million from the year-ago figure of $239.9 million. Lease operating costs rose to $39.7 million in the quarter under review from the year-ago period’s $25.4 million. Exploration and abandonment expenses in the quarter were $142.6 million, reflecting a massive jump from the year-ago period’s $35 million. Moreover, transportation and processing costs of $11.3 million were incurred in the quarter versus no such expense in the year-ago period. Depreciation costs increased to $160 million in fourth-quarter 2018 compared with $105 million in the corresponding quarter of last year. 


Capital Expenditure & Balance Sheet


During the quarter under review, capital expenditure totaled $416 million, of which 87% was allotted to drilling and completion activities, and the remaining was spent on facilities and infrastructure.  


As of Dec 31, Parsley had cash and cash equivalents of $163.2 million, with the current ratio being 0.83. The company’s total liquidity came in at around $1.2 billion, including an undrawn credit revolver amounting to $991.3 million. Its long-term debt totaled around $2,181.7 million, representing a debt-to-capitalization ratio of 28.1%.


Proved Reserve Growth


Proved reserves of Parsley increased 25% year over year on the back of extensions and discoveries to 521.7 million barrels of oil equivalent (MMBoe) as of Dec 31, 2018. Proved developed reserves of 311.3 MMBoe, reflecting 49% y/y increase, constituted 60% of total proved reserves.




Parsley expects 2019 capital expenditure in the range of $1,350-$1,550 million, which is lower than the updated 2018 spending level of $1,762 million. For full-year 2019, the company expects total production in the range of 124,000-134,000 barrels of oil equivalent per day (Boe/d), higher than 109,416 Boe/d recorded in 2018. The Zacks Rank #3 (Hold) company expects first-quarter oil output to average 75.5-78 thousand barrels per day. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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