A month has gone by since the last earnings report for Parsley Energy (PE - Free Report) . Shares have lost about 11.8% 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 its most recent earnings report in order to get a better handle on the important drivers.
Second-Quarter 2018 Results
Parsley Energy reported second-quarter 2018 adjusted net earnings per share of 39 cents, missing the Zacks Consensus Estimate of 41 cents due to increased operating expenses. The bottom line, however, improved from the prior-year quarter’s adjusted earnings of 5 cents per share. The year-over-year improvement was caused by higher oil prices and production.
Operating income in the second quarter of 2018 was $210.3 million, significantly higher than the year-ago quarter’s $45.3 million.
Parsley Energy’s total revenues in the second quarter amounted to $467.8 million, increasing substantially from $213.7 million a year ago. The top line also surpassed the Zacks Consensus Estimate of $431 million.
Production & Price Realizations
Parsley Energy's average quarterly volume increased 66.6% year over year to 107.8 thousand barrels of oil equivalent per day (MBoe/d) — 84% liquids — on the back of rising production of oil, natural gas and natural gas liquids (NGLs). In the quarter under review, the company put 44 net horizontal wells in production.
Average realized oil price jumped about 41.4% from the year-ago quarter to $64.29 per barrel, while average natural gas price realization decreased 44.8% to $1.32 per thousand cubic feet. Realized price for NGLs in the quarter was $27.20 per barrel, higher than the year-ago quarter’s $19.02. Overall, the company fetched $47.48 per barrel compared with $35.89 a year ago.
The company’s total operating expenses rose to $257.5 million from the year-ago figure of $168.4 million. Lease operating costs rose to $35.9 million in the quarter under review from the year-ago period’s $29.6 million. Exploration and abandonment expenses in the quarter were $3.4 million, higher than the year-ago period’s $2.4 million.
However, lease operating expenses per barrel decreased to $3.66 from $5.03 in the second quarter of 2017.
Capital Expenditure & Balance Sheet
During the quarter under review, capital expenditure of the company totaled $477 million, of which 81.1% was attributed to drilling and completion activities.
As of Jun 30, Parsley Energy had cash and cash equivalents of $201.7 million. Long-term debt of the company stands at around $2.2 billion, representing a debt-to-capitalization ratio of 26.3%.
Revised 2018 Guidance
Parsley Energy revised its full-year capital expenditure outlook due to increased well costs from steel tariffs, higher working interest and shorter cycle times. Capital expenditures are anticipated within $1.65-$1.75 billion, up from the prior guidance of $1.35-$1.55 billion. Of the total capital program, 85-90% is expected to be used in drilling and completion activities.
The company increased its full-year equivalent production expectation from 98-108 MBoe/d to 106-111 Mboed/d. Oil production is expected in the range of 68-70.5 thousand barrels.
The company expects its lease operating expenses in the range of $3.50-$4.25 per barrel, lower than previous expectation of $3.75-$5.00 per barrel of oil equivalent. For the full year, the company expects to put 158 net wells in production, higher than previous estimate of 144 net wells, with support from operational efficiency.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -9.08% due to these changes.
Currently, Parsley Energy has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, 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 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.