What Does Parsley Energy's 2019 Capital Budget Plan Reveal?

Parsley Energy, Inc. (NYSE:PE) recently announced its full-year 2019 preliminary outlook. The company intends to decrease development activities in 2019 due to volatility in commodity prices. However, healthy output growth is expected in the next year. The capital budget provided by the company assumes $50 per barrel for U.S. benchmark WTI crude in 2019, while service cost is expected to be more or less static.

Budget Analysis

Parsley Energy expects its 2019 capital expenditure in the range of $1,350-$1,550 million, which is lower than updated 2018 capital expenditure guidance of $1,650-$1,750 million. In the first nine months of 2018, the company’s capital expenditure came in at $1,345 million, of which $1,143 million was allocated for drilling and completion activities and $193 million was directed toward facilities and infrastructure.

Cash Flow: The company intends its 2019 spending to not exceed operating cash flow level of more than $250 million. In the training 12 months, it had a negative free cash flow of $599 million.

Production

For 2019, the company expects total production in the range of 124,000-134,000 barrels of oil equivalent per day (Boe/d). The figures are much higher than updated 2018 production guidance of 106,000-111,000 Boe/d that assumes the effects of around $164 million worth acreage divestitures in central Reagan County, southern Upton County, and northern Howard County.

The company is expected to produce 80,000-85,000 barrels of oil per day (BPD) in 2019, which is also higher than updated 2018 oil production guidance of 68,000-70,500 Boe/d that assumes the effects of the recent divestments.

Moreover, the company plans to reduce the number of development rigs to the range of 12-14 in 2019 from the current level of 16 rigs. Similarly, it intends to deploy only 3-4 frac spreads in 2019, lower than the current level of five frac spreads.

Fourth Quarter: For the fourth quarter of 2018, the company expects its net oil production in the range of 76,000-78,000 Boe/d and overall equivalent output within 118,000-121,000 Boe/d. Due to increased completion efficiency, the company foresees at least 40 gross horizontal wells to come online in the fourth quarter.

Other Companies That Issued 2019 Budget

Some other important companies in the energy sector that revealed their 2019 capital expenditure budget include Canadian Natural Resources Limited (TO:CNQ) , Chevron Corporation (NYSE:CVX) and Suncor Energy Inc. (NYSE:SU) .

Reeling under discounted crude prices and pipeline crisis, the Canadian energy sector is struggling to find a path to growth. Amid this crisis, Canadian Natural slashed its capital budget by C$1 billion.

Chevron has pegged its 2019 capital and exploratory budget at $20 billion, which marks the first upward revision of the same in four years.

Suncor’s full-year 2019 production is expected to grow 10%, despite output curtailment from the government of Alberta.

Price Performance and Zacks Rank

Austin, TX-based Parsley Energy has lost 46.8% in the past year compared with the 33.2% collective decline of the industry it belongs to. The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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