A month has gone by since the last earnings report for Parsley Energy (PE - Free Report) . Shares have lost about 17% 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 Energy Q3 Earnings Jump on Oil Prices, Production
Parsley Energy reported third-quarter 2018 adjusted net earnings per share of 45 cents, beating the Zacks Consensus Estimate of 44 cents. The bottom line also improved from the prior-year quarter’s adjusted earnings of 12 cents per share. The strong third-quarter results were supported by higher oil equivalent prices and overall production
Operating income in the third quarter of 2018 was $219.6 million, significantly higher than the year-ago quarter’s $63.1 million.
Parsley Energy’s total revenues in the third quarter amounted to $511 million, increasing substantially from $241 million a year ago. The top line also surpassed the Zacks Consensus Estimate of $491 million.
Notably, the Permian Basin-focused upstream company has finalized some previously announced agreements to add more takeaway capacity for its 2019 production.
Parsley Energy's average quarterly volume increased 62.4% year over year to 116.2 thousand barrels of oil equivalent per day (MBoe/d) — comprising 84.6% liquids — on the back of rising production of oil, natural gas and natural gas liquids (NGLs). In the quarter under review, the company put 46 net horizontal wells in production.
Average realized oil price jumped about 37.1% from the year-ago quarter to $62.78 per barrel while average natural gas price realization decreased 47.8% to $1.30 per thousand cubic feet. Realized price for NGLs in the quarter was $31.26 per barrel, higher than the year-ago quarter’s $22.23. Overall, the company fetched $47.58 per barrel compared with $36.62 a year ago.
The company’s total operating expenses rose to $291.4 million from the year-ago figure of $177.9 million. Lease operating costs rose to $39.8 million in the quarter under review from the year-ago period’s $29.5 million. Exploration and abandonment expenses in the quarter were $11.1 million, higher than the year-ago period’s $88,000. Moreover, transportation and processing costs of $8.5 million were incurred in the quarter in contrast to no such expense in the year-ago period.
However, lease operating expenses per barrel decreased to $3.72 from $4.49 in the third quarter of 2017.
Capital Expenditure & Balance Sheet
During the quarter under review, capital expenditure of the company totaled $444 million, of which 86.3% was attributed to drilling and completion activities, and 11.7% was spent on facilities and infrastructure.
As of Sep 30, Parsley Energy had cash and cash equivalents of $167.8 million. The company’s total liquidity came in at around $1.2 billion, including an undrawn credit revolver amounting to $991 million.
Long-term debt of the company stands at around $2.2 billion, representing a debt-to-capitalization ratio of 25.9%.
Parsley Energy is raising around $170 million through asset divestures, which can impact the company’s fourth-quarter oil equivalent production by a few hundred barrels a day. Weather-related downtimes in the fourth quarter are also expected to impact production volumes. For full-year 2019, oil equivalent production is expected to fall 1,000 barrels per day due to divestitures. However, this fall in volumes is not expected to offset the 50% yearly volume growth of the company.
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 -6.62% due to these changes.
At this time, Parsley Energy has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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.