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Parsley Reports Solid 1Q20, Cuts Capex, Maintains Strong Free Cash Generation View, Balance Sheet And Return Of Capital Despite Meager Oil Prices

May 05, 2020 8:57 AM ETParsley Energy, Inc. (PE) Stock7 Comments
Steve Zachritz profile picture
Steve Zachritz


  • Parsley announced solid 1Q20 results with in line volumes, an EPS beat, and free cash flow.
  • The company is controlling the controllable (having previously slashed capex and suspended production and cost guidance) they are now halting drilling and completion operations.
  • Management is focused on unhedged pricing as a criteria for new completion economics. They see no reason to grow at current prices.
  • The balance sheet remains strong and they are guiding to significant free cash flow in a $20 to $30 world.
  • They maintained the dividend.

This is a Z4 Research Pre Call Quick Note

The 1Q20 Numbers:

  • Volumes were as expected (in total and in composition),
  • Realized oil prices were tight to WTI at a $0.49 discount. We note that Midland pricing has in the last few days reversed back to premiums as the press releases detailing voluntary curtailments have mounted from mid cap and larger players.
  • Operating costs continue to impress with cash G&A setting a new quarterly low at $1.65 / BOE (aided by senior staff taking minimum 50% cash pay cuts).
  • Management maintained the dividend at $0.05 per quarter. This is positive given that: 1) it's a relatively new dividend a course reversal so soon after initiation would likely be poorly received, and 2) it's part of the free cash flow AND return of capital all upstream NAM investors not just want to see now but require from all names outside of the really small caps.
  • EPS was a beat at $0.29 vs $0.24 expected.
  • Parsley generated free cash of $19 mm for the quarter vs outspend of $135mm in the year ago quarter.
  • Capex for the quarter was $379 mm, well below the Street's expectation of $420 mm and representing over half of the new 2020 budget.

2020 Guidance:

  • Capex - Revised to below $0.7 B from the previously reduced below < $1.0 B and vs original $1.6 to $1.8 B.
    • Drilling and completion operations have been temporarily suspended. It appears a price near $30 WTI would prompt them to return to a 4 to 5 rig program. Given the lack of growth they will benefit from a lower base decline in 2021 and this takes the form of management guiding to a maintenance budget for 2021 of ~ $600 mm (that would appear to hold oil only volumes in 2021 flat at about

This article was written by

Steve Zachritz profile picture
Thanks for your interest in Z4 Energy Research. As of January 2021, Tipranks placed us in the top 2% of all financial bloggers and top 5% of overall experts. If you would like more in depth discussions on oil, natural gas, wind, solar, fuel cells, and other renewables, please contact us at zman@zmansenergybrain.com. We have covered energy at zmansenergybrain.com since 2006 posting 6 days a week and have been in the markets since the early 1990s. We post weekly slide shows on the oil and natural gas inventory reports and have daily pieces on individual names as well as group reports within a number of energy segments (Gassy Players, Permian Players, etc). Plus, Z is standing by essentially 24/7 to answer your energy questions. So come give us a try. IF you see our free pieces on Seeking Alpha rest assured that it was long ago written up, watched, mulled, and written up again on our site before we put a piece in the public free space. Also note that while we don't give investment advice we do tell you what we are thinking and when we buy and sell (on the site and via email) and show you our entire trading history (the trading blotter). And the site is fully searchable, by ticker and topic, again, back to 2006. So thanks for the follow and we hope to see your over at our site. Best Regards, Z Z4 Energy Research (Zman's Energy Brain)

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Comments (7)

Steve Zachritz profile picture
Site is open to the public today, come see us
Atticvs Research profile picture
What Oil, Nat Gas and NGL prices do you use to get EBITDA of $1,286k in 2021? Thks.
Steve Zachritz profile picture
That's not us, that's Street. Oil is likely just over $40 nymex (maybe $8 to $10 high to strip at the moment, NG is probably about $2.50 hub.
Kyle Reese profile picture
Very useful article on Parsley. So their oil breakeven is somewhere between $20 and $30?
Steve Zachritz profile picture
Current costs/2H20 projected costs = breakevens to be had in the mid to lower $20's.
Dr. Roth profile picture
Thank you for a practical analysis of a strong permian producer.
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