AUSTIN, Texas, March 18, 2020 /PRNewswire/ -- Parsley Energy,
Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company")
today provided a supplementary update on its 2020 development
program that was outlined on March 9,
2020.
Supplementary Update for 2020 Outlook
- Parsley is reiterating its baseline capital budget assumption
of $30-35 WTI oil price for the
remainder of 2020. In this context, Parsley is reducing its 2020
capital budget to less than $1.0
billion, representing a reduction of more than 40% at the
midpoint to the Company's previous $1.6-$1.8 billion
budget.
- Consistent with the Company's commitment to free cash flow
generation and in response to recent commodity price trends,
Parsley plans to significantly reduce development activity in 2020.
During January and February, Parsley operated 15 development rigs
and five frac spreads on average. On March
9, 2020, Parsley announced that it had recently dropped to
three frac spreads and had approved plans to drop to 12 rigs as
soon as practicable. Over the next several weeks, Parsley plans to
further reduce its baseline activity pace to four-to-six rigs and
two-to-three frac spreads.
- Considering the challenging environment, all of Parsley's
executive officers have elected to reduce their respective annual
cash compensation by at least 50% when compared to 2019.
- In the context of $30-$35 WTI oil
prices for the remainder of the year, Parsley is now targeting at
least $225 million of free cash
flow(1), which is an increase of nearly $150 million from the Company's preliminary
target announced on March 9, 2020.
Parsley anticipates this enhanced free cash flow will be
accomplished through the aforementioned activity reductions, lower
service and equipment costs, and incremental downside protection
built into the Company's restructured hedge positions. In a lower
oil price environment, Parsley will adjust as needed to preserve
its balance sheet.
- Parsley's initial 2020 guidance ranges were based on our
previously announced development plan, and as such, do not reflect
our revised plan and reduced development activity. Parsley will
provide more detail on our revised 2020 guidance ranges when we
release the company's first quarter 2020 financial results.
Summary Comment and Outlook
"This is not a time for indecision or half measures," commented
Matt Gallagher, Parsley's President
and CEO. "Parsley has acted swiftly and aggressively to protect its
balance sheet and dividend as well as preserve long-term
shareholder value in a $30-$35 WTI oil
price environment. We are committed to allocating capital based on
prevailing market conditions. These activity levels provide
for a sustaining and healthy operating model at these prices should
they hold long term. Despite having over $1 billion in hedge settlements if oil drops to
the low $20s through the end of 2021, we will continue to evaluate
unhedged returns when prescribing activity levels. Our work
is far from done and our team will continue to be adaptive and
responsive in these challenging times."
Hedging Update
In this lower commodity price environment,
Parsley continues to proactively manage its hedge
position. The Company has restructured portions of its 2020 hedge
position and increased downside protection by adding supplemental
hedge positions for 2020 and 2021. Additionally, Parsley's hedge
restructuring since March 4, 2020 has
brought in $41 million of cash as
well as lowered future deferred premiums by $47 million.
For details on Parsley's updated hedge position as of
March 17, 2020, please see the tables
below.
Oil Derivative
Positions (2)
|
|
1Q20
|
2Q20
|
3Q20
|
4Q20
|
1Q21
|
2Q21
|
3Q21
|
4Q21
|
OPTION
CONTRACTS:
|
|
|
|
|
|
|
|
|
CUSHING
|
|
|
|
|
|
|
|
|
Swaps - Cushing
(MBbls/d)(3)
|
11.0
|
11.0
|
11.0
|
11.0
|
|
|
|
|
Swap Price
($/Bbl)
|
$ 57.87
|
$ 57.87
|
$ 57.87
|
$ 57.87
|
|
|
|
|
MIDLAND
|
|
|
|
|
|
|
|
|
Three Way Collars -
Midland (MBbls/d)(4)
|
27.0
|
22.5
|
17.1
|
17.1
|
|
|
|
|
Short Call Price
($/Bbl)
|
$ 61.81
|
$ 53.30
|
$ 52.29
|
$ 52.29
|
|
|
|
|
Long Put Price
($/Bbl)
|
$ 51.10
|
$ 39.38
|
$ 36.49
|
$ 36.49
|
|
|
|
|
Short Put Price
($/Bbl)
|
$ 41.10
|
$ 29.38
|
$ 26.49
|
$ 26.49
|
|
|
|
|
Put Spreads -
Midland (MBbls/d)(5)
|
1.1
|
3.3
|
|
|
|
|
|
|
Long Put Price
($/Bbl)
|
$ 50.00
|
$ 50.00
|
|
|
|
|
|
|
Short Put Price
($/Bbl)
|
$ 40.00
|
$ 40.00
|
|
|
|
|
|
|
Two Way Collars -
Midland (MBbls/d)(6)
|
2.2
|
6.6
|
6.5
|
6.5
|
|
|
|
|
Short Call Price
($/Bbl)
|
$ 48.00
|
$ 48.00
|
$ 48.00
|
$ 48.00
|
|
|
|
|
Long Put Price
($/Bbl)
|
$ 43.00
|
$ 43.00
|
$ 43.00
|
$ 43.00
|
|
|
|
|
Swaps - Midland
(MBbls/d)(3)
|
3.3
|
3.3
|
|
|
5.0
|
5.0
|
5.0
|
5.0
|
Swap Price
($/Bbl)
|
$ 55.20
|
$ 55.20
|
|
|
$ 40.50
|
$ 40.50
|
$ 40.50
|
$ 40.50
|
MAGELLAN EAST
HOUSTON ("MEH")
|
|
|
|
|
|
|
|
|
Three Way Collars -
MEH (MBbls/d)(4)
|
46.4
|
51.0
|
33.9
|
33.9
|
13.3
|
13.2
|
2.4
|
2.4
|
Short Call Price
($/Bbl)
|
$ 70.71
|
$ 50.92
|
$ 51.06
|
$ 51.06
|
$ 64.38
|
$ 64.38
|
$ 55.00
|
$ 55.00
|
Long Put Price
($/Bbl)
|
$ 56.16
|
$ 37.88
|
$ 38.03
|
$ 38.03
|
$ 53.13
|
$ 53.13
|
$ 40.00
|
$ 40.00
|
Short Put Price
($/Bbl)
|
$ 46.16
|
$ 27.88
|
$ 28.03
|
$ 28.03
|
$ 43.13
|
$ 43.13
|
$ 30.00
|
$ 30.00
|
Put Spreads -
MEH (MBbl/d)(5)
|
2.7
|
8.2
|
24.5
|
24.5
|
|
|
|
|
Long Put Price
($/Bbl)
|
$ 50.00
|
$ 50.00
|
$ 40.00
|
$ 40.00
|
|
|
|
|
Short Put Price
($/Bbl)
|
$ 40.00
|
$ 40.00
|
$ 30.00
|
$ 30.00
|
|
|
|
|
Swaps - MEH
(MBbls/d)(3)
|
|
4.4
|
10.8
|
10.8
|
52.0
|
52.0
|
52.0
|
52.0
|
Swap Price
($/Bbl)
|
|
$32.52
|
$ 41.89
|
$ 41.89
|
$ 41.17
|
$ 41.17
|
$ 41.17
|
$ 41.17
|
BRENT
|
|
|
|
|
|
|
|
|
Two Way Collars -
Brent (MBbls/d)(6)
|
|
3.3
|
6.5
|
6.5
|
|
|
|
|
Short Call Price
($/Bbl)
|
|
$ 52.10
|
$ 52.30
|
$ 52.30
|
|
|
|
|
Long Put Price
($/Bbl)
|
|
$ 47.10
|
$ 47.30
|
$ 47.30
|
|
|
|
|
Swaps - Brent
(MBbls/d)(4)
|
|
7.9
|
6.3
|
6.3
|
22.0
|
22.0
|
22.0
|
22.0
|
Swap Price
($/Bbl)
|
|
$ 44.81
|
$ 47.40
|
$ 47.40
|
$ 44.44
|
$ 44.44
|
$ 44.44
|
$ 44.44
|
Total Hedged
Volumes (MBbls/d)
|
93.8
|
121.5
|
116.5
|
116.5
|
92.3
|
92.2
|
81.4
|
81.4
|
Premium Realization
($MM)(7)
|
($13.4)
|
$14.5
|
$8.5
|
$8.5
|
($2.0)
|
($2.0)
|
($0.7)
|
($0.7)
|
BASIS
SWAPS:
|
|
|
|
|
|
|
|
|
Midland-Cushing
Basis Swaps (MBbls/d)(8)
|
18.9
|
18.9
|
14.0
|
14.0
|
|
|
|
|
Basis Differential
($/Bbl)
|
$(1.00)
|
$(1.00)
|
$(1.44)
|
$(1.44)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas Derivative
Positions (2)
|
|
|
|
|
|
|
|
|
|
1Q20
|
2Q20
|
3Q20
|
4Q20
|
1Q21
|
2Q21
|
3Q21
|
4Q21
|
OPTION
CONTRACTS:
|
|
|
|
|
|
|
|
|
WAHA
|
|
|
|
|
|
|
|
|
Swaps - Waha
(MMBtu/d)(3)
|
48.2
|
48.2
|
48.2
|
48.2
|
|
|
|
|
Swap Price
($/MMBtu)
|
$
1.08
|
$
0.70
|
$
0.90
|
$
0.86
|
|
|
|
|
Total Hedged
Volumes (MMBtu/d)
|
48.2
|
48.2
|
48.2
|
48.2
|
|
|
|
|
About Parsley Energy, Inc.
Parsley Energy, Inc. is an independent oil and natural gas
company focused on the acquisition, development, exploration, and
production of unconventional oil and natural gas properties in the
Permian Basin. For more information, visit the Company's website at
www.parsleyenergy.com.
Cautionary Statement Regarding 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.
|
|
|
(1)
|
As used in this news
release, free cash flow, a non-GAAP financial measure, means net
cash provided by operating activities before transaction expenses
related to the acquisition of Jagged Peak Energy Inc. ("Jagged
Peak") and changes in operating assets and liabilities, net of
acquisitions, less accrual-based development capital expenditures.
The Company is unable to present a reconciliation of
forward-looking free cash flow because components of the
calculation, including changes in working capital accounts, are
inherently unpredictable. Additionally, estimating the most
directly comparable GAAP measure with the required precision
necessary to provide a meaningful reconciliation is extremely
difficult and could not be accomplished without unreasonable
effort.
|
|
|
(2)
|
As of 03/17/2020.
Prices represent the weighted average price of contracts scheduled
for settlement during the period.
|
|
|
(3)
|
Parsley receives the
swap price.
|
|
|
(4)
|
When the reference
price (Midland, MEH, or Brent) is at or above the short call price,
Parsley receives the short call price. When the reference price is
between the long put price and the short put price, Parsley
receives the long put price. When the reference price is below the
short put price, Parsley receives the reference price plus the
difference between the short put price and the long put
price.
|
|
|
(5)
|
When the reference
price is above the long put price, Parsley receives the reference
price. When the reference price is between the long put price and
the short put price, Parsley receives the long put price. When the
reference price is below the short put price, Parsley receives the
reference price plus the difference between the short put price and
the long put price.
|
|
|
(6)
|
When the reference
price is above the short call price, Parsley receives the short
call price. When the reference price is between the short call
price and the put price, Parsley receives the reference price. When
the reference price is below the put price, Parsley receives the
put price.
|
|
|
(7)
|
Premium realizations
represent net premiums paid (including deferred premiums), which
are recognized as income or loss in the period of
settlement.
|
|
|
(8)
|
Swaps that fix the
basis differentials representing the index prices at which Parsley
sells its oil and gas produced in the Permian Basin less the WTI
Cushing price.
|
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SOURCE Parsley Energy, Inc.