A month has gone by since the last earnings report for Parsley Energy (PE). Shares have lost about 6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Parsley Energy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Parsley Q3 Earnings Miss on Weaker Commodity Price
Parsley Energy, Inc. reported third-quarter 2019 results wherein earnings missed the Zacks Consensus Estimate.
The company posted adjusted net earnings per share of 29 cents, lagging the Zacks Consensus Estimate of 34 cents. Moreover, the bottom line declined from 45 cents per share in third-quarter 2018 due to weaker year-over-year commodity price realizations. Precisely, average realized price per barrel of oil equivalent (Boe) came in at $36.65, which is 23% lower than the year-ago figure of $47.58.
Parsley’s total revenues in the quarter under review amounted to $510.15 million, marginally lower than $511.02 million a year ago. However, the top line surpassed the Zacks Consensus Estimate of $500 million on higher-than-expected production. As a matter of fact, this upstream player’s output of 150.4 thousand barrels of oil equivalent per day (BOE/d) beat the Zacks Consensus Estimate of 146 thousand BOE/d.
Production Stats and Realized Prices (Minus Derivatives’ Impact)
Parsley's average quarterly volume expanded 29.4% year over year to 150.4 thousand barrels of oil equivalent per day (comprising 82.5% liquids) on the back of rising production of oil, natural gas and natural gas liquids (NGLs). In the quarter under review, the company placed 35 gross horizontal wells on production.
Average realized oil price declined 12.1% from the year-ago quarter to $55.16 per barrel and natural gas price realization decreased 54.6% to 59 cents per thousand cubic feet. Realized price for NGLs in the quarter was $11.08 per barrel, lower than the year-ago level of $31.26.
Total operating expenses rose to $357.1 million in the quarter under review from the year-ago figure of $290 million. Further, lease operating costs climbed to $45.7 million from $39.7 million in the prior year. Depreciation costs also increased to $211.7 million from $157.3 million in the corresponding quarter of last year.
Capex & Balance Sheet
Capital expenditure totaled $318 million, of which 86% was allotted to drilling and completion activities, and the remaining was spent on facilities and infrastructure.
As of Sep 30, Parsley had cash and cash equivalents of $5 million. Its long-term debt totaled $2,197.1 million, representing a debt-to-capitalization ratio of 27.48%.
In the reported quarter, Parsley reached an agreement to acquire smaller rival Jagged Peak Energy in an all-stock deal worth $2.27 billion comprising $625-million net debt as of Jun 30. The company also initiated a dividend during this period. It declared fourth-quarter dividend of 3 cents a share, payable Dec 20 to its shareholders of record as of Dec 10.
Per the energy explorer, this “low premium” deal will leave an immediate positive impact on its 2020 cash flow along with net asset value and returns on invested capital. Additionally, this Permian pure play will be able to lower general and administrative costs by almost $25 million in the first year followed by $40-$50 million annual savings subsequently.
On a positive note, Parsley tightened its capital budget while increasing its output guidance. The company now expects 2019 capital expenditure in the range of $1,400-$1,470 million compared with the prior forecast of $1,400-$1,490 million. Full-year lease operating expenses per Boe is revised from $3.40-$3.90 to $3.40-$3.65. Parsley also lowered annual projection for general and administrative costs per Boe.
Total oil production is now envisioned in the band of 86,400-87,400 thousand barrels of oil per day (MBo/d) compared with the past forecast of 85-86.5 MBoe/d. Full-year net total production is anticipated in the range of 138-142 MBoe/d compared with the earlier estimate of 134-139 MBoe/d.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -7.63% due to these changes.
Currently, Parsley Energy has an average Growth Score of C, 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.
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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