Parsley Energy Announces Fourth Quarter 2017 Financial And Operating Results; Announces Officer Promotions

AUSTIN, Texas, Feb. 21, 2018 /PRNewswire/ -- Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today announced financial and operating results for the quarter ended December 31, 2017. The Company has posted to its website a presentation that supplements the information in this release.

Fourth Quarter 2017 Highlights

• Net production averaged 80.3 MBoe per day, up 12% versus 3Q17 and 78% year-over-year. Net oil production increased 9% quarter-over-quarter and 69% year-over-year.
• Parsley's previously announced 2018 oil production guidance of 65-70 MBo per day represents year-over-year growth of 50% at the midpoint.
• Lease operating expense ("LOE") per Boe decreased 23% versus 3Q17 to $3.44.
• Favorable trends in unit costs supported a 23% quarter-over-quarter increase in Parsley's pre-hedge cash margin to $31.45 per Boe.⁽¹⁾
• The Company recently executed several high-impact acreage trades that will facilitate extended lateral lengths in its core Upton County footprint. Net of acreage traded away, Parsley added approximately 0.4 million net lateral feet to the Company's horizontal drilling inventory through trades executed since its last quarterly update in November.
• Proved reserves of 416 MMBoe as of December 31, 2017 represent an 87% increase versus proved reserves as of December 31, 2016. Proved developed reserves of 209 MMBoe as of December 31, 2017 represent a 97% increase versus proved developed reserves as of December 31, 2016.

"Following a transformative 2017 for Parsley Energy, we are eager to efficiently harvest the ample resource base our team has assembled, tested, and optimized," said Bryan Sheffield, Parsley's Chairman and CEO. "Even at a steady activity pace, we look forward to delivering compelling high-margin growth on a simplified 2018 development program."

Operational Highlights

During 4Q17, Parsley spud 42 and completed 41 horizontal wells with an average working interest of 95% and an average lateral length of approximately 9,500 feet.

Parsley's 4Q17 activity included a three-well stacked pad in Martin County targeting the Lower Spraberry, Wolfcamp A, and Wolfcamp B zones. The Strain Ranch 12-1 pad is part of the Company's growing activity on its expanded asset base in the northern Midland Basin. Early results from these three 1.5 mile lateral wells are promising, with peak 30-day production rates averaging 175 Boe (139 Bo) per day per thousand lateral feet.

"Acquisitions completed in 2017 transformed the long-term resource potential of our Company," said Matt Gallagher, Parsley's President and COO. "Results like the Strain Ranch pad highlight the high-return opportunity set we possess, and having integrated and gained experience on acquired assets, we are prepared to capitalize on this sizable resource opportunity."

Financial Highlights

During 4Q17, the Company recorded net income attributable to its stockholders of $49.9 million, or $0.20 per weighted average share, compared to a net loss of $13.3 million, or $0.05 per weighted average share, during 3Q17. 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 4Q17 was $95.9 million, or $0.30 per diluted share, compared to $29.3 million, or $0.12 per weighted average share, during 3Q17.⁽²⁾

Adjusted earnings before interest, income taxes, depreciation, depletion, amortization, and exploration expense ("Adjusted EBITDAX") for 4Q17 was $217 million, up 32% compared to 3Q17.⁽³⁾

Parsley registered favorable quarter-over-quarter trends in unit costs. LOE per Boe decreased from $4.49 in 3Q17 to $3.44 in 4Q17. General and administrative expense ("G&A") per Boe decreased from $5.10 in 3Q17 to $4.72 in 4Q17, while cash G&A per Boe, which excludes stock-based compensation expense, decreased from $4.32 in 3Q17 to $4.04 in 4Q17. Depreciation, depletion, and amortization expense per Boe decreased from $14.41 in 3Q17 to $14.23 in 4Q17.

Reported capital expenditures increased from $307 million in 3Q17 to $417 million in 4Q17, reflecting a 41% quarter-over-quarter increase in net completed footage, as well as increases in facilities and infrastructure spending and non-operated development.

Solid Balance Sheet and Advantaged Hedge Position

Parsley entered 2018 with a strong balance sheet. As of December 31, 2017, the Company had approximately $1.7 billion of liquidity, consisting of $703 million of cash, cash equivalents, and short-term investments and an undrawn amount of $997 million on the Company's revolver.⁽⁴⁾ Pro forma for the January 2018 divestiture of certain non-operated properties, the Company likewise had approximately $1.7 billion of liquidity, consisting of $739 million of cash, cash equivalents, and short-term investments and an undrawn amount of $997 million on the Company's revolver.⁽⁴⁾  Parsley's proactive hedging strategy protects its balance sheet and anticipated cash flow while retaining commodity price upside.

For details on Parsley's hedging position, please see the tables below under Supplemental Information, the presentation posted to the Company's website, and/or the Company's Annual Report on Form 10-K, upon availability, for the year ended December 31, 2017.

Full-year 2018 Guidance

Year-end 2017 Reserves

Parsley posted strong reserves growth in 2017. The Company's proved reserves as of December 31, 2017 totaled 416.4 MMBoe, consisting of 248.5 MMbo, 451.7 Bcf, and 92.6 MMboe of natural gas liquids ("NGLs").

Proved Reserve Highlights

• Relative to proved reserves as of December 31, 2016, proved reserves as of December 31, 2017 increased 87% to 416.4 MMBoe, while proved developed reserves increased 97% to 209.4 MMBoe. Proved developed reserves as of December 31, 2017 represent 50% of total proved reserves.
• Total reserves increased by 194.1 MMBoe as compared to 2017 production volumes of 24.8 MMBoe.
• Organic reserves replacement ratio of 683%.⁽⁵⁾
• Parsley's standardized measure of discounted future net cash flows relating to proved reserves ("standardized measure") at December 31, 2017 was $3.0 billion, an increase of 155% relative to the Company's standardized measure at December 31, 2016. At SEC Pricing, the pre-tax PV-10 of proved reserves was $3.9 billion at December 31, 2017, an increase of 164% relative to the corresponding measure at December 31, 2016.⁽⁶⁾
• At SEC Pricing, the pre-tax PV-10 of proved developed reserves was $2.5 billion at December 31, 2017, an increase of over 150% relative to the corresponding measure at December 31, 2016.⁽⁶⁾
• Positive performance revisions of 4.5 MMBo to oil proved developed producing ("PDP") reserves estimates indicate the stability of the Company's asset base.

Changes in reserves for the year ended December 31, 2017 are summarized in the table below:

Parsley's internally prepared estimated proved reserves as of December 31, 2017 were audited by Netherland, Sewell & Associates, the Company's independent reserve engineer. These estimates have been prepared in accordance with the definitions and regulations of the U.S. Securities and Exchange Commission and conform to the FASB Accounting Standards Codification Topic 932, Extractive Activities – Oil and Gas. Prices used are based on the 12-month unweighted arithmetic average of the first-day-of-the-month price for each month in the period January through December 2017. Adjusting for quality, transportation fees, and market differentials, the pricing is as follows: $49.17 per barrel of oil, $22.20 per barrel of NGL, and $2.53 per Mcf of gas.  The estimates of the Company's net reserves as of December 31, 2017 are summarized in the table below:

Officer Promotions

As part of Parsley's ongoing commitment to operational excellence, the Company has promoted Larry Parnell to Senior Vice President-Development Operations, Carrie Endorf to Vice President-Reservoir Engineering and Planning, and Jody Jordan to Vice President-Marketing, effective February 1, 2018.

Bryan Sheffield, the Company's Chairman and Chief Executive Officer, said, "It is my pleasure to announce the promotions of Larry Parnell, Carrie Endorf, and Jody Jordan. These individuals earned their promotions through superior leadership of their respective groups and the substantial individual contributions that each has made to Parsley. I am happy to have Larry, as Senior Vice President-Development Operations, join with Paul Treadwell, Senior Vice President-Production Operations, to manage our operational activity as we focus on executing our simplified 2018 program. Likewise, Carrie and Jody bring unique skills and depth of expertise to their roles, and I look forward to their future contributions."

Conference Call Information

Parsley Energy will host a conference call and webcast to discuss its results for the fourth quarter of 2017 on Thursday, February 22 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 March 8, 2018 by dialing 877-660-6853 (United States/Canada) or 201-612-7415 (International). Conference ID: 13674991. A live broadcast will also be available at www.parsleyenergy.com under the "Investor Relations" 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 Securities and Exchange Commission ("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 -

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, asset retirement obligation accretion expense, loss (gain) on sale of property, loss on early extinguishment of debt, inventory write down, loss (gain) on derivatives, net settlements on derivative instruments, net premium realization on options that settled during the period, and certain additional items.

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 measures of other companies. The Company believes that Adjusted EBITDAX is useful to investors as a widely followed measure of operating performance.

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

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, change in TRA liability, loss (gain) on sale of property, exploration and abandonment costs, acquisition costs, inventory write down, and loss on early extinguishment of debt 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 loss.

PV-10

PV-10 is a non-GAAP financial measure and generally differs from the Standardized Measure, the most directly comparable GAAP financial measure, because it does not include the effects of income taxes on future net reserves. Neither PV-10 nor Standardized Measure represents an estimate of the fair market value of our oil and natural gas properties. We and others in the industry use PV-10 as a measure to compare the relative size and value of proved reserves held by companies without regard to the specific tax characteristics of such companies.

The following table provides a reconciliation of PV-10 to the GAAP financial measure of Standardized Measure as of December 31, 2017:

Supplemental Information

Derivatives