It has been about a month since the last earnings report for Parsley Energy (PE). Shares have added about 1.8% 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 Misses Q4 Earnings and Sales Estimates
Parsley Energy 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.
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.
Guidance
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Parsley Energy has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward 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.
Parsley Energy, Inc. (PE): Free Stock Analysis Report
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