It has been about a month since the last earnings report for Parsley Energy (PE). Shares have lost about 5.9% 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 Q2 Earnings Beat Estimates, Sales Miss Mark
Parsley Energy reported second-quarter 2020 adjusted net earnings per share of 3 cents. The Zacks Consensus Estimate was of a loss of 14 cents. Better-than-expected results were attributable to higher year-over-year production volumes. Further, Parsley Energy's average quarterly volume came in at 183.2 thousand barrels of oil equivalent per day, outpacing the Zacks Consensus Estimate of 171 thousand barrels of oil equivalent per day. However, the bottom line fell from earnings of 32 cents per share in second-quarter 2019 due to weak year-over-year average price realizations of oil and NGLs.
Moreover, Parsley Energy’s total revenues of $220.21 million lagged the Zacks Consensus Estimate of $327 million. Also, the top line plunged 55.8% from the year-ago sales of $498.54 million due to weak commodity price realization.
Production Data and Realized Prices (Minus Derivatives’ Impact)
Parsley Energy's average quarterly volume expanded 30.7% year over year to 183.2 thousand barrels of oil equivalent per day (comprising 83.1% liquids), backed by the rising production of oil, natural gas and natural gas liquids (NGLs). In the quarter under review, the company’s 17 gross horizontal wells came online.
Average realized oil price declined 68.6% from the year-ago quarter to $18.30 per barrel and NGLs price realization decreased 64% to $5.10. Meanwhile, realized price for natural gas in the quarter was 71 cents, lower than the year-ago level of one cent per thousand cubic feet.
Total Expenses
Total operating expenses declined to $295.9 million from the year-ago figure of $317.7 million. Further, production and ad valorem taxes descended to $23.4 million from $30.7 million in the prior year. Depreciation costs also fell to $127.5 million from $198.6 million in the corresponding quarter of last year.
Capex & Balance Sheet
Capital expenditure totaled $64 million, of which 93.8% was allotted to drilling and completion activities while the remaining was spent on water infrastructure and non-operated development operations. In the quarter under review, the company generated free cash flow worth $113.9 million.
As of Jun 30, 2020, Parsley Energy had cash and cash equivalents of $2.3 million. Its long-term debt was $3,122.8 million, representing total debt to total capital of 45.1%. Parsley Energy also has $638.3 million under its revolving credit facility.
The company’s board of directors declared a quarterly dividend of 5 cents per share, payable Sep 18, 2020 to its shareholders of record on Sep 8.
Guidance
The oil industry is battered big time by the coronavirus pandemic that pervaded most sectors until now. Fuel demand took a huge hit following large-scale travel constraints imposed globally. Hence, the company did not provide production and activity guidance due to such uncertainties.
In response to the bearish oil price trend, Parsley Energy trimmed its 2020 capital expense outlook to the $650-$700 million range from the prior projection of less than $700 million. More than 60% of that estimate is already spent in the first half of this year.
Notably, this Midland, TX-based company anticipates generating a minimum free cash flow of $350 million from operations if WTI Crude prices average at $35 per barrel for the remaining year. This free cash flow view represents an increase of $50 million from the earlier-provided outlook.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 2712.5% due to these changes.
VGM Scores
At this time, Parsley Energy has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Parsley Energy has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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