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Parsley Energy (PE) Down 3.7% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Parsley Energy (PE - Free Report) . Shares have lost about 3.7% in that time frame, outperforming 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 catalysts.

Parsley Misses Q1 Earnings, Tops Sales Estimates

Parsley Energy posted adjusted net earnings per share of 22 cents, missing the Zacks Consensus Estimate by a penny. High costs and lower-than-expected realized prices led to the underperformance. Precisely, average realized prices in the quarter were $37.78 per barrel of oil equivalent (Boe), lagging the Zacks Estimate of $38.25. The bottom line also declined from 31 cents per share recorded in first-quarter 2018. 

Parsley’s total revenues in the quarter under review amounted to $427.7 million, increasing from $392.7 million a year ago. Further, the top line surpassed the Zacks Consensus Estimate of $411 million.

Production Stats and Realized Prices (Excluding Derivatives Impact)

Parsley's average quarterly volume increased 34.2% year over year to 125.4 thousand barrels of oil equivalent per day — comprising 84.5% liquids — on the back of rising production of oil, natural gas and natural gas liquids (NGLs). In the quarter under review, the company put 34 gross horizontal wells in production.

Average realized oil price declined 16.4% from the year-ago quarter to $51.83 per barrel, while average natural gas price realization decreased 32.3% to $1.38 per thousand cubic feet. Realized price for NGLs in the quarter was $17.97 per barrel, lower than the year-ago level of $24.72. Overall, the company fetched $37.78 per barrel compared with $46.27 a year ago.

Total Expenses

Total operating expenses rose to $311.1 million from the year-ago figure of $233.5 million. Lease operating costs rose to $41.2 million in the quarter under review from the year-ago period’s $28.8 million. Exploration and abandonment expenses in the quarter were $23 million, reflecting a massive jump from the year-ago period’s $5 million. Depreciation costs increased to $173.7 million in first-quarter 2019 from $121.2 million in the corresponding quarter of last year. Transportation, production and general/administrative expenses also increased in the quarter.

Capex & Balance Sheet

During the quarter under review, capital expenditure totaled $406 million, of which 82.5% was allotted to drilling and completion activities, and the remaining was spent on facilities and infrastructure.  

As of Mar 31, Parsley had cash and cash equivalents of $10.4 million, with the current ratio being 0.42. Its long-term debt totaled around $2,180 million, representing a debt-to-capitalization ratio of 25.7%.

Guidance

Parsley reiterated its 2019 guidance for capital spending and output. The company expects 2019 capital expenditure in the range of $1,350-$1,550 million. Total production is expected in the band of 124,000-134,000 barrels of oil equivalent per day (Boe/d), higher than 109,416 Boe/d recorded in 2018. The company expects second-quarter oil output to average 81-85 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

At this time, Parsley Energy has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 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.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Parsley Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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