Creating Value

With premier acreage, a leading growth profile, robust returns, abundant resource upside, and a strong financial position, Parsley Energy is poised for high-return growth across market cycles, creating value for our shareholders.

Parsley Energy Announces First Quarter 2018 Financial And Operating Results

May 03, 2018

AUSTIN, Texas, May 3, 2018 /PRNewswire/ -- Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today announced financial and operating results for the quarter ended March 31, 2018. The Company has posted to its website a presentation that supplements the information in this release. 

First Quarter 2018 Highlights

  • Net oil production increased 15% quarter-over-quarter and 57% year-over-year to 59.3 MBo per day. Total net production averaged 93.4 MBoe per day.(1)
  • Parsley placed 21 gross operated horizontal wells on production in the Delaware Basin during 1Q18 at an average completed lateral length of approximately 9,600 feet, representing more lateral footage than the Company completed in the Delaware Basin during all of 2017.
  • Parsley registered Company-record initial production rates for wells completed in Glasscock and Pecos Counties, as detailed below.
  • The Company demonstrated strong cost control during the first quarter of 2018. Parsley reported lease operating expense ("LOE") per Boe of $3.43,(1) below the Company-provided guidance range for full-year average LOE per Boe. Both general and administrative expense ("G&A") per Boe and cash based G&A per Boe, which excludes stock-based compensation expense, decreased quarter-over-quarter and year-over-year to $4.16(1) and $3.56,(1) respectively.
  • The Company amended its revolving credit agreement on April 30, 2018, thereby increasing its borrowing base from $1.8 billion to $2.3 billion while maintaining the Company's elected commitment amount of $1.0 billion.

"Parsley Energy made a confident first step toward executing our simplified 2018 development program," said Bryan Sheffield, Parsley's Chairman and CEO. "Accelerated development last year not only gave Parsley a head start on securing high quality services and equipment, the corresponding production uplift also means we are benefiting disproportionately from currently higher oil prices. While Parsley is well positioned to benefit from ongoing oil price strength, operational continuity at a steady development pace remains our highest priority this year."

Operational Update

Parsley's strong sequential production growth was driven by solid operational execution and favorable well productivity across its acreage footprint, highlighted by efficient Delaware Basin operations and a rapid return to full production following winter weather events in January. Volume growth was also supplemented by an increase in non-operated completion activity.

Activity Overview

During the first quarter, the Company spud 43 and placed on production 41 gross operated horizontal wells. Parsley's working interest on wells placed on production was approximately 97%, with an average completed lateral length of approximately 9,100 feet. Completion activity was nearly evenly distributed between the Midland Basin and the Delaware Basin, where the Company placed on production 20 and 21 gross operated horizontal wells, respectively. We expect that development activity will be weighted more to the Midland Basin for the remainder of the year, consistent with prior Company commentary.

Notable Well Results

With four rigs currently active in Glasscock County, recent well results in Glasscock bode well for the production contribution associated with this sizable portion of Parsley's development program. Among these results, the two-well Catfish Hunter 12-1 pad registered strong peak 30-day production rates of 2,022 Boe per day (69% oil) and 2,004 Boe per day (72% oil), respectively. Both wells targeted the Wolfcamp B interval and were completed with approximately two-mile laterals.

Parsley increased Delaware Basin oil production by more than 50% during 1Q18 as compared to 4Q17 through a combination of strong well results, cycle time improvement, and enhanced net revenue interests associated with mineral ownership on 18 of 21 wells placed on production during the quarter. Parsley's 1Q18 Delaware Basin activity included the three-well Trees State 31-34 pad in Pecos County targeting the Upper Wolfcamp A, Lower Wolfcamp A, and Wolfcamp B zones. Early results from this pad are outstanding, including two Company-record Delaware wells with respective peak 30-day production rates of 2,115 Boe per day (85% oil) and 1,940 Boe per day (86% oil) on approximately two-mile laterals. Notably, these wells are among the first to be completed in the southeast portion of Parsley's Pecos County acreage position. The 21 gross operated horizontal wells Parsley placed on production during 1Q18 represent more lateral footage than the Company completed in the Delaware Basin during all of 2017.

Non-Operated Activity

Non-operated development activity increased during the first quarter with 15 gross (6 net) horizontal wells placed on production, the timing of which was slightly ahead of Company forecasts. Non-operated activity for the remainder of 2018 is expected to be minimal.

Takeaway Positioning

During 1Q18, Parsley reported an unhedged oil price realization of $61.99/Bbl net of transportation costs, representing a differential of just $0.90/Bbl relative to the average NYMEX WTI price for the quarter.

By virtue of proactive steps taken to bolster the Company's firm transportation capacity and diversify its regional pricing exposure, Parsley now enjoys certain advantages with respect to its takeaway and marketing arrangements. Parsley currently has firm transport agreements covering 95,000 Bo per day of gross operated oil production. Additionally, the Company has diversified pricing agreements with large scale oil purchasers that price a portion of Parsley's barrels relative to Magellan East Houston, Cushing, and Midland benchmarks. During 2017, Parsley also layered on Midland-Cushing basis swaps that provide additional regional price protection during 2018.

"Our proactive marketing strategy has put us in a position of strength from both a flow assurance and realized pricing standpoint," said Matt Gallagher, Parsley's President and COO. "Given the interconnect flexibility, oil quality, scale, and growth visibility we can provide, our crude production is attractive to premier purchasers."

Financial Update

During 1Q18, the Company recorded net income attributable to its stockholders of $82.9 million, or $0.32 per share, compared to net income of $49.9 million, or $0.16 per share, during 4Q17. Excluding, on a tax-adjusted basis, certain items that the Company does not view as indicative of its ongoing financial performance, and adding back the non-controlling interest allocated to Class B stockholders, adjusted net income for 1Q18 was $81.1 million, or $0.31 per share, compared to $95.9 million, or $0.30 per share, in 4Q17.(2)

Adjusted earnings before interest, income taxes, depreciation, depletion, amortization, and exploration expense ("Adjusted EBITDAX") for 1Q18 was $282.3 million, up 30% compared to the same measure in 4Q17.(2)

Parsley demonstrated strong cost control during the first quarter of 2018. The Company reported LOE per Boe of $3.43,(1) below the Company-provided guidance range for full-year average LOE per Boe. Both G&A per Boe and cash based G&A per Boe, which excludes stock-based compensation expense, decreased quarter-over-quarter and year-over-year to $4.16(1) and $3.56,(1) respectively. Favorable trends in cash operating costs and strong realized pricing drove a robust operating cash margin of $35.65 per Boe, or 77% of average realized price per Boe.(3)

Parsley reported capital expenditures of $424 million during the quarter, comprised of  $373 million for drilling and completion activity and $51 million for facilities and infrastructure, including saltwater disposal wells. In addition to spending associated with the above-mentioned 43 operated horizontal spuds and 41 operated horizontal wells placed on production, reported 1Q18 capital expenditures include $14 million of expenses associated with non-operated activity. With planned activity weighted more to the lower-cost Midland Basin for the remainder of 2018, we expect gross development costs per operated well to decrease from 1Q18 levels. We expect net development costs per operated well to decrease for the same reason, along with an expected reduction in average working interest.

Liquidity and Hedging

Parsley amended its revolving credit agreement on April 30, 2018, thereby increasing its borrowing base from $1.8 billion to $2.3 billion while maintaining the Company's elected commitment amount of $1.0 billion. As of March 31, 2018, Parsley had approximately $1.5 billion of liquidity, consisting of $500 million of cash, cash equivalents, and short-term investments, and an undrawn amount of $991 million on the Company's revolver.(4)

Almost all of Parsley's expected 2018 oil production is subject to hedge protection, and the Company recently added to its 2019 hedge position. Parsley's hedging strategy protects its balance sheet and anticipated cash flow while retaining significant exposure to higher commodity prices. For details on Parsley's hedging position, please see the tables below under Supplemental Information and/or the Company's Quarterly Report on Form 10-Q, upon availability, for the three months ended March 31, 2018.

Conference Call Information

Parsley Energy will host a conference call and webcast to discuss its results for the first quarter of 2018 on Friday, May 4 at 9:00 a.m. Eastern Time (8:00 a.m. Central Time). Participants should call 877-407-0672 (United States/Canada) or 412-902-0003 (International) 10 minutes before the scheduled time and request the Parsley Energy conference call. A telephone replay will be available shortly after the call through May 18 by dialing 877-660-6853 (United States/Canada) or 201-612-7415 (International). Conference ID: 13678639. A live broadcast will also be available on the internet at www.parsleyenergy.com under the "Events & Presentations" section of the website. The Company has also posted to its website a presentation that supplements the information in this release.

About Parsley Energy, Inc.

Parsley Energy, Inc. is an independent oil and natural gas company focused on the acquisition and development of unconventional oil and natural gas reserves in the Permian Basin in West Texas. For more information, visit the Company's website at www.parsleyenergy.com.

Forward Looking Statements

Certain statements contained in this news release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent Parsley Energy's expectations or beliefs concerning future events, and it is possible that the results described in this news release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Parsley Energy's control, which could cause actual results to differ materially from the results discussed in the forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, Parsley Energy does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for Parsley Energy to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements found in the Company's filings with the SEC, including its Annual Report on Form 10-K. The risk factors and other factors noted in the Company's SEC filings could cause its actual results to differ materially from those contained in any forward-looking statement.

- Tables to Follow -

___________

(1)

Natural gas and natural gas liquids ("NGLs") sales and associated production volumes for the three months ended March 31, 2018 reflect adjustments associated with Parsley's adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers ("ASC 606"), effective January 1, 2018. Accordingly, all references to 1Q18 production volumes and per Boe unit costs likewise reflect this adoption, which has the effect of increasing certain natural gas and NGLs volumes and revenues, offset by a corresponding transportation and processing cost such that there is no change to reported net income. The recognition and presentation of oil volumes and associated revenues and expenses are unaffected by the adoption of ASC 606.


Previously provided full-year guidance for production volumes and unit costs incorporated the anticipated effect of the adoption of ASC 606.


For more information on ASC 606 and a reconciliation of 1Q18 production and unit costs under ASC 605 and as adjusted under ASC 606, please see the table and associated commentary below under Supplemental Information and/or the Company's Quarterly Report on Form 10-Q, upon availability, for the three months ended March 31, 2018.

(2)

"Adjusted EBITDAX" and "adjusted net income" are not presented in accordance with generally accepted accounting principles in the United States ("GAAP"). For definitions and reconciliations of the non-GAAP financial measures of adjusted EBITDAX and adjusted net income to GAAP financial measures, please see the tables and associated commentary below under Reconciliation of Non-GAAP Financial Measures.

(3)

"Operating cash margin" as used in this release represents the Company's average sales price (without realized derivatives) per Boe less lease operating expense per Boe, transportation and processing costs per Boe, production and ad valorem taxes per Boe, and cash based general and administrative expense per Boe (exclusive of stock-based compensation), each of which reflects the adoption of ASC 606. Sales price and cost components referenced in the calculation of operating cash margin can be found in "Selected Operating Data" in the accompanying financial tables.

(4)

Fully undrawn revolver balance is net of letters of credit.

 

Parsley Energy, Inc. and Subsidiaries

Selected Operating Data

(Unaudited)



Three Months Ended


March 31, 2018


December 31, 2017


March 31, 2017

Net production volumes:






Oil (MBbls)

5,341



4,737



3,394


Natural gas (MMcf) (1)

8,556



7,221



4,419


Natural gas liquids (MBbls) (1)

1,643



1,449



800


Total (MBoe)

8,410



7,390



4,931


Average daily net production (Boe/d)

93,444



80,327



54,789


Average sales prices (2) :






Oil, without realized derivatives (per Bbl)

$

61.99



$

53.95



$

50.01


Oil, with realized derivatives (per Bbl)

$

58.32



$

50.88



$

48.52


Natural gas, without realized derivatives (per Mcf)

$

2.04



$

2.15



$

2.82


Natural gas, with realized derivatives (per Mcf)

$

2.06



$

2.13



$

2.80


NGLs (per Bbl)

$

24.72



$

26.84



$

21.77


Total, without realized derivatives (per Boe)

$

46.27



$

41.94



$

40.48


Total, with realized derivatives (per Boe)

$

43.97



$

39.96



$

39.44


Average costs (per Boe) (3):






Lease operating expenses

$

3.43



$

3.44



$

3.57


Transportation and processing costs

$

0.75



$



$


Production and ad valorem taxes

$

2.88



$

3.01



$

2.26


Depreciation, depletion and amortization

$

14.41



$

14.23



$

13.99


General and administrative expenses (including stock-based      compensation)

$

4.16



$

4.72



$

4.88


General and administrative expenses (cash based)

$

3.56



$

4.04



$

4.02


___________

(1)

Natural gas and NGLs volumes for the three months ended March 31, 2018 reflect adjustments associated with Parsley's adoption of ASC 606, effective January 1, 2018.

(2)

Average prices shown in the table reflect prices both before and after the effects of our realized commodity hedging transactions. Our calculations of such effects include both realized gains and losses on cash settlements for commodity derivative transactions and premiums paid or received on options that settled during the period. Realized oil prices are net of transportation costs. Realized prices for certain gas and NGLs volumes are net of transportation, gathering, and processing costs as stipulated by ASC 606. For more information, please see associated commentary below under Supplemental Information and/or the Company's Quarterly Report on Form 10-Q, upon availability, for the three months ended March 31, 2018.

(3)

Average costs per Boe for the three months ended March 31, 2018 reflect adjustments associated with Parsley's adoption of ASC 606, effective January 1, 2018.

 

Parsley Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except for per share data)(1)



Three Months Ended March 31,


2018


2017

REVENUES




Oil sales

$

331,103



$

169,745


Natural gas sales (2)

17,424



12,467


Natural gas liquids sales (2)

40,620



17,413


Other

3,594



1,233


Total revenues

392,741



200,858


OPERATING EXPENSES




Lease operating expenses

28,832



17,627


Transportation and processing costs (2)

6,267




Production and ad valorem taxes

24,186



11,162


Depreciation, depletion and amortization

121,199



68,970


General and administrative expenses (including stock-based compensation)

34,995



24,042


Exploration and abandonment costs

5,411



2,763


Acquisition costs

4



1,344


Accretion of asset retirement obligations

354



136


Other operating expenses

2,175



2,283


Total operating expenses

223,423



128,327


OPERATING INCOME (LOSS)

169,318



72,531


OTHER INCOME (EXPENSE)




Interest expense, net

(31,968)



(19,336)


Loss on sale of property

(111)




Loss on early extinguishment of debt



(3,891)


(Loss) gain on derivatives

(10,793)



24,616


Change in TRA liability

(82)



(20,549)


Interest income

2,123



2,371


Other income

301



950


Total other expense, net

(40,530)



(15,839)


INCOME BEFORE INCOME TAXES

128,788



56,692


INCOME TAX EXPENSE

(23,325)



(18,402)


NET INCOME

105,463



38,290


LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

(22,573)



(8,848)


NET INCOME ATTRIBUTABLE TO PARSLEY ENERGY, INC. STOCKHOLDERS

$

82,890



$

29,442






Net income per common share:




Basic

$

0.32



$

0.13


Diluted

$

0.32



$

0.13


Weighted average common shares outstanding:




Basic

260,654



220,674


Diluted

261,639



221,697


___________

(1)

Certain reclassifications and adjustments to prior period amounts have been made to conform with current presentation.

(2)

Natural gas and NGLs sales and transportation and processing costs for the three months ended March 31, 2018 reflect adjustments associated with Parsley's adoption of ASC 606, effective January 1, 2018.

 

Parsley Energy, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited, in thousands)



March 31, 2018


December 31, 2017


(In thousands)

ASSETS




CURRENT ASSETS




Cash and cash equivalents

$

350,762



$

554,189


Short-term investments

149,345



149,283


Accounts receivable:




Joint interest owners and other

49,221



42,174


Oil, natural gas and NGLs

159,314



123,147


Related parties

311



388


Short-term derivative instruments, net

34,563



41,957


Assets held for sale



1,790


Other current assets

6,530



6,558


Total current assets

750,046



919,486


PROPERTY, PLANT AND EQUIPMENT




Oil and natural gas properties, successful efforts method

8,964,262



8,551,314


Accumulated depreciation, depletion and impairment

(938,629)



(822,459)


Total oil and natural gas properties, net

8,025,633



7,728,855


Other property, plant and equipment, net

131,691



106,587


Total property, plant and equipment, net

8,157,324



7,835,442


NONCURRENT ASSETS




Assets held for sale, net



14,985


Long-term derivative instruments, net

25,150



15,732


Other noncurrent assets

8,128



7,553


Total noncurrent assets

33,278



38,270


TOTAL ASSETS

$

8,940,648



$

8,793,198






LIABILITIES AND EQUITY




CURRENT LIABILITIES




Accounts payable and accrued expenses

$

415,283



$

407,698


Revenue and severance taxes payable

124,974



109,917


Current portion of long-term debt

2,388



2,352


Short-term derivative instruments, net

74,675



84,919


Current portion of asset retirement obligations

7,308



7,203


Total current liabilities

624,628



612,089


NONCURRENT LIABILITIES




Liabilities related to assets held for sale



405


Long-term debt

2,179,996



2,179,525


Asset retirement obligations

20,476



19,967


Deferred tax liability

55,730



21,403


Payable pursuant to tax receivable agreement

62,681



58,479


Long-term derivative instruments, net

27,487



20,624


Total noncurrent liabilities

2,346,370



2,300,403


COMMITMENTS AND CONTINGENCIES




STOCKHOLDERS' EQUITY




Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued and outstanding




Common stock




Class A, $0.01 par value, 600,000,000 shares authorized, 268,550,575 shares issued and 268,112,160 shares outstanding at March 31, 2018 and 252,419,601 shares issued and 252,260,300 shares outstanding at December 31, 2017

2,686



2,524


Class B, $0.01 par value, 125,000,000 shares authorized, 48,731,731 and 62,128,157 shares issued and outstanding at March 31, 2018 and December 31, 2017

487



622


Additional paid in capital

4,911,682



4,666,365


Retained earnings

126,409



43,519


Treasury stock, at cost, 438,415 shares and 159,301 shares at March 31, 2018 and December 31, 2017

(7,200)



(735)


Total stockholders' equity

5,034,064



4,712,295


Noncontrolling interest

935,586



1,168,411


Total equity

5,969,650



5,880,706


TOTAL LIABILITIES AND EQUITY

$

8,940,648



$

8,793,198


 

Parsley Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)



Three Months Ended March 31,


2018


2017


(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:




Net income

$

105,463



$

38,290


Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation, depletion and amortization

121,199



68,970


Accretion of asset retirement obligations

354



136


Loss on sale of property

111




Loss on early extinguishment of debt



3,891


Amortization and write off of deferred loan origination costs

1,189



783


Amortization of bond premium

(129)



(129)


Stock-based compensation

5,069



4,209


Deferred income tax expense

23,325



18,402


Change in TRA liability

82



20,549


Loss (gain) on derivatives

10,793



(24,616)


Net cash paid for derivative settlements

(1,903)



(1,188)


Net cash paid for option premiums

(13,506)



(16,291)


Net premiums paid on options that settled during the period

(16,526)



(4,854)


Other

5,215



118


Changes in operating assets and liabilities, net of acquisitions:




Accounts receivable

(43,214)



(7,025)


Accounts receivable—related parties

77



103


Other current assets

20,361



(85,460)


Other noncurrent assets

(635)



(902)


Accounts payable and accrued expenses

(5,427)



17,676


Revenue and severance taxes payable

15,057



9,363


Net cash provided by operating activities

226,955



42,025


CASH FLOWS FROM INVESTING ACTIVITIES:




Development of oil and natural gas properties

(411,073)



(161,003)


Acquisitions of oil and natural gas properties

(27,447)



(589,286)


Additions to other property and equipment

(28,248)



(10,628)


Proceeds from sales and exchanges of oil and natural gas properties

43,228




Other

349




Net cash used in investing activities

(423,191)



(760,917)


CASH FLOWS FROM FINANCING ACTIVITIES:




Borrowings under long-term debt



451,500


Payments on long-term debt

(694)



(66,328)


Debt issuance costs

(32)



(6,280)


Proceeds from issuance of common stock, net



2,123,486


Repurchase of common stock

(6,465)



(112)


Net cash (used in) provided by financing activities

(7,191)



2,502,266


Net (decrease) increase in cash, cash equivalents and restricted cash

(203,427)



1,783,374


Cash, cash equivalents and restricted cash at beginning of period

554,189



136,669


Cash, cash equivalents and restricted cash at end of period

$

350,762



$

1,920,043


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:




Cash paid for interest

$

29,455



$

2,463


Cash paid for income taxes

$



$

200


SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:




Asset retirement obligations incurred, including changes in estimate

$

359



$

3,501


Additions to oil and natural gas properties - change in capital accruals

$

13,013



$

27,463


Additions to other property and equipment funded by capital lease borrowings

$

491



$

881


Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDAX

Adjusted EBITDAX is not a measure of net income as determined by GAAP. Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of the Company's consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDAX as net income (loss) before depreciation, depletion and amortization, exploration and abandonment costs, net interest expense, income tax expense (benefit), change in Tax Receivable Agreement ("TRA") liability, stock-based compensation, acquisition costs, (gain) loss on sale of property, asset retirement obligation accretion expense, loss on early extinguishment of debt, inventory write down, (gain) loss on derivatives, net settlements on derivative instruments, net premium realizations on options that settled during the period.

Management believes Adjusted EBITDAX is useful because it allows the Company to more effectively evaluate its operating performance and compare the results of its operations from period to period without regard to its financing methods or capital structure. The Company excludes the items listed above from net income in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within its industry depending upon accounting methods and book values of assets, capital structures, and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of the Company's operating performance. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX. The Company's computations of Adjusted EBITDAX may not be comparable to other similarly titled measure of other companies. The Company believes that Adjusted EBITDAX is a widely followed measure of operating performance.

The following table presents a reconciliation of Adjusted EBITDAX to the GAAP financial measure of net (loss) income for each of the periods indicated.

Parsley Energy, Inc. and Subsidiaries

Adjusted EBITDAX

(Unaudited, in thousands)(1)



Three Months Ended March 31,


2018


2017

Adjusted EBITDAX reconciliation to net income:




Net income attributable to Parsley Energy, Inc. stockholders

$

82,890



$

29,442


Net income attributable to noncontrolling interests

22,573



8,848


Depreciation, depletion and amortization

121,199



68,970


Exploration and abandonment costs

5,411



2,763


Interest expense, net

29,845



16,965


Income tax expense

23,325



18,402


EBITDAX

285,243



145,390


Change in TRA liability

82



20,549


Stock-based compensation

5,069



4,209


Acquisition costs

4



1,344


Loss on sale of property

111




Accretion of asset retirement obligations

354



136


Loss on early extinguishment of debt



3,891


Inventory write down

61




Loss (gain) on derivatives

10,793



(24,616)


Net settlements on derivative instruments

(2,873)



(301)


Net premium realization on options that settled during the period

(16,526)



(4,854)


Adjusted EBITDAX

$

282,318



$

145,748


___________

(1)

Certain reclassifications to prior period amounts have been made to conform with current presentation.

Adjusted Net Income

Adjusted net income is not a measure of net income determined in accordance with GAAP. Adjusted net income is a supplemental non-GAAP performance measure used by management to evaluate financial performance, prior to non-cash gains or losses on derivatives, net cash received for derivative settlements, net premiums received on options that settled during the period, (gain) loss on sale of property, exploration and abandonment costs, acquisition costs, loss on early extinguishment of debt, and change in TRA liability, while adjusting for noncontrolling interest and the associated changes in estimated income tax. Management believes adjusted net income is useful because it may enhance investors' ability to assess Parsley's historical and future financial performance. Adjusted net income should not be considered an alternative to, or more meaningful than, consolidated net income, operating income, or any other measure of financial performance presented in accordance with GAAP. The following table presents a reconciliation of the non-GAAP financial measure of adjusted net income to the GAAP financial measure of net income (loss).

Parsley Energy, Inc. and Subsidiaries

Adjusted Net Income and Net Income Per Share

(Unaudited, in thousands, except per share data)



Three Months Ended March 31,


2018


2017

Net income - as reported

$

82,890



$

29,442






Adjustments:




Loss (gain) on derivatives

10,793



(24,616)


Net settlements on derivative instruments

(2,873)



(301)


Net premium realization on options that settled during the period

(16,526)



(4,854)


Loss on sale of property

111




Exploration and abandonment costs

5,411



2,763


Acquisition costs

4



1,344


Loss on early extinguishment of debt



3,891


Change in TRA liability

82



20,549


Noncontrolling interest

647




Change in estimated income tax

522



5,950


Adjusted net income

$

81,061



$

34,168






Net income per diluted share - as reported(1)

$

0.32



$

0.13






Adjustments:




Loss (gain) on derivatives

$

0.04



$

(0.11)


Net settlements on derivative instruments

(0.01)




Net premium realization on options that settled during the period

(0.06)



(0.02)


Loss on sale of property




Exploration and abandonment costs

0.02



0.01


Acquisition costs



0.01


Loss on early extinguishment of debt



0.01


Change in TRA liability



0.09


Noncontrolling interest




Change in estimated income tax



0.03


Adjusted net income per diluted share(2)

$

0.31



$

0.15






Basic weighted average shares outstanding - as reported(1)

260,654



220,674


Effect of dilutive securities:




Restricted Stock and Restricted Stock Units

985



1,023


Diluted weighted average shares outstanding - as reported(1)

261,639



221,697






Effect of dilutive securities:




Class B Common Stock




Restricted Stock and Restricted Stock Units




Diluted weighted average shares outstanding for adjusted net income(2)

261,639



221,697


___________

(1)

For the three months ended March 31, 2018 and 2017, the number of weighted average diluted shares used to calculate actual net income per share is based on the fact that, under the "if converted" and treasury stock methods, Class B Common Stock was not recognized because it would have been antidilutive.

(2)

For purposes of calculating adjusted net income per diluted share for the three months ended March 31, 2018 and 2017, Class B Common Stock and restricted stock and restricted stock units were not recognized because they would have been antidilutive using the treasury stock method.

Supplemental Information

Impact of ASC 606 Adoption

Parsley adopted ASC 606 effective January 1, 2018 using the modified retrospective approach. As a result, we changed our accounting policy for revenue recognition, which resulted in the following adjustments:


Three Months Ended March 31, 2018


ASC 605


Adjustment


ASC 606

Production revenues (in thousands):






Oil sales

$

331,103



$



$

331,103


Natural gas sales

15,586



1,838



17,424


Natural gas liquids sales

36,191



4,429



40,620


Total production revenues

382,880



6,267



389,147


Operating expenses






Transportation and processing costs



6,267



6,267


Production revenues less transportation and processing costs

$

382,880



$



$

382,880








Net income attributable to Parsley, Inc. stockholders (in thousands)

$

82,890



$



$

82,890








Production:






Oil (MBbls)

5,341





5,341


Natural gas (MMcf)

7,982



574



8,556


Natural gas liquids (MBbls)

1,464



179



1,643


Total (MBoe)

8,083



327



8,410








Average daily production volume:






Oil (Bbls)

59,344





59,344


Natural gas (Mcf)

88,689



6,378



95,067


Natural gas liquids (Bbls)

16,267



1,989



18,256


Total (Boe)

89,811



3,633



93,444








Certain unit costs (per Boe):






Lease operating expenses

$

3.57



$

(0.14)



$

3.43


Transportation and processing costs

$



$

0.75



$

0.75


Production and ad valorem taxes

$

2.99



$

(0.11)



$

2.88


Depreciation, depletion and amortization

$

14.99



$

(0.58)



$

14.41


General and administrative expenses (including stock-based compensation)

$

4.33



$

(0.17)



$

4.16


General and administrative expenses (cash based)

$

3.70



$

(0.14)



$

3.56


Changes to natural gas and NGLs sales were made in accordance with the control model defined in ASC 606. Under the new control model, we are required to identify and separately analyze each contract associated with revenues to determine the appropriate accounting application.

As a result of this analysis, we modified our accounting and presentation of natural gas and NGLs sales, and transportation and processing costs under certain marketing agreements. For additional information related to our adoption of ASC 606, please refer to Note 2—Summary of Accounting Policies—Impact of ASC 606 Adoption in our consolidated financial statements contained in our Quarterly Report on Form 10-Q, upon availability, for the three months ended March 31, 2018.

Open Derivatives Positions


Parsley Energy, Inc. and Subsidiaries

Open Crude Oil Derivatives Positions (1)



2Q18


3Q18


4Q18


1Q19


2Q19


3Q19


4Q19

Put Spreads (MBbls/d) (2)

11.5


34.2


37.5


20.6


20.3


11.4


11.4

Long Put Price ($/Bbl)

$

52.50


$

49.64


$

49.67


$

54.32


$

54.32


$

55.71


$

55.71

Short Put Price ($/Bbl)

$

42.50


$

39.64


$

39.67


$

44.32


$

44.32


$

45.71


$

45.71

Three Way Collars (MBbls/d) (3)

49.5


31.0


31.0


8.3


8.2


9.8


9.8

Short Call Price ($/Bbl)

$

68.11


$

75.65


$

75.65


$

80.40


$

80.40


$

80.33


$

80.33

Long Put Price ($/Bbl)

$

50.00


$

50.00


$

50.00


$

50.00


$

50.00


$

50.83


$

50.83

Short Put Price ($/Bbl)

$

40.00


$

40.00


$

40.00


$

40.00


$

40.00


$

40.83


$

40.83

Premium Realization ($ MM) (4)

$

(16.5)


$

(17.9)


$

(19.1)


$

(8.4)


$

(8.4)


$

(5.5)


$

(5.5)

Collars (MBbls/d) (5)

3.0


3.0


3.0









Short Call Price ($/Bbl)

$

61.31


$

61.31


$

61.31









Long Put Price ($/Bbl)

$

45.67


$

45.67


$

45.67









Total MBbls/d Hedged

64.0


68.2


71.5


28.9


28.6


21.2


21.2















Mid-Cush Basis Swaps (MBbls/d) (6)

11.4


11.3


11.3









Swap Price ($/Bbl)

$

(0.86)


$

(0.86)


$

(0.86)























Rollfactor Swaps (MBbl/d) (7)

15.0


15.0


15.0









Swap Price ($/Bbl)

$

0.60


$

0.60


$

0.60









 

Parsley Energy, Inc. and Subsidiaries

Open Natural Gas Derivatives Positions (1)



2Q18


3Q18


4Q18

Three Way Collars (MMBtu/d) (3)

8,152


8,152


8,152

Short Call Price ($/MMBtu)

$

3.60


$

3.60


$

3.60

Long Put Price ($/MMBtu)

$

3.00


$

3.00


$

3.00

Short Put Price ($/MMBtu)

$

2.75


$

2.75


$

2.75

Total MMBtu/d Hedged

8,152


8,152


8,152

_________

(1)

As of 5/2/2018. Prices represent the weighted average price of contracts scheduled for settlement during the period.

(2)

When the NYMEX price is above the long put price, Parsley receives the NYMEX price. When the NYMEX price is between the long put price and the short put price, Parsley receives the long put price. When the NYMEX price is below the short put price, Parsley receives the NYMEX price plus the difference between the short put price and the long put price.

(3)

Functions similarly to put spreads except that when the index price is at or above the call price, Parsley receives the call price.

(4)

Premium realizations represent net premiums paid (including deferred premiums), which are recognized as income or loss in the period of settlement.

(5)

When the NYMEX price is above the call price, Parsley receives the call price. When the NYMEX price is below the long put price, Parsley receives the long put price. When the NYMEX price is between the short call and long put prices, Parsley receives the NYMEX price.

(6)

Parsley receives the swap price.

(7)

These positions hedge the timing risk associated with Parsley's physical sales. Parsley generally sells crude oil for the delivery month at a sales price based on the average NYMEX price during that month, plus an adjustment calculated as a spread between the weighted average prices of the delivery month, the next month, and the following month during the period when the delivery month is the first month.

 

Parsley Energy

 

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SOURCE Parsley Energy, Inc.

Brad Smith, Ph.D., CFA, Senior Vice President, Corporate Strategy and Investor Relations, ir@parsleyenergy.com, (512) 505-5199, or Kyle Rhodes, Director of Investor Relations, ir@parsleyenergy.com, (512) 505-5199