AUSTIN, Texas, Nov. 2, 2016 /PRNewswire/ -- Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today announced financial and operating results for the quarter ended September 30, 2016. The Company has posted to its website a presentation that supplements the information in this release.

Third Quarter 2016 Highlights

• Net production averaged 43.0 MBoe per day, up 20% versus 2Q16 and 99% year-over-year. Net oil production increased 24% versus 2Q16 and 131% year-over-year, with oil volumes representing 67% of total production in 3Q16.
• The Company is increasing full-year 2016 production guidance from 36.0-38.0 MBoe per day to 37.0-39.0 MBoe per day.
• Parsley is adding 550 gross / 450 net horizontal drilling locations to the Company's Midland Basin inventory, reflecting a second target zone in the Wolfcamp B interval. Parsley's 15 operated wells completed in the upper portion of the Wolfcamp B interval across the Company's Midland Basin acreage footprint are exceeding the Company's 1 MMBoe EUR type curve for Wolfcamp A/B wells by 6% at 180 days and 9% at 360 days, in line with results from wells completed by the Company in the lower portion of the Wolfcamp B interval. Based on the average lateral length, working interest, royalty burden, and expected costs associated with the Wolfcamp B locations added to inventory, Parsley estimates that the average net present value per added location is approximately $3-$5 million.[1]
• Parsley posted strong results from the Company's first set of stacked wells in the Wolfcamp A, Upper Wolfcamp B, and Lower Wolfcamp B intervals. Completed concurrently with engineered sequencing, the three wells are on average tracking slightly ahead of the Company's 1 MMBoe EUR type curve after almost one month of production. The Grace 45-1-4306H, completed in the Upper Wolfcamp B interval, recently registered the second-highest 24-hour initial production rate in the Company's history at 2,420 Boe per day, representing 306 Boe per day per thousand stimulated feet.
• Lease operating expense ("LOE") per Boe decreased for the sixth consecutive quarter, down 5% versus 2Q16 to $4.15.
• The Company is lowering full-year 2016 LOE per Boe guidance from $4.50-$5.25 to $4.25-$4.75.
• Subsequent to the end of 3Q16, Parsley closed the previously announced acquisition of approximately 9,100 net acres and certain associated mineral and overriding royalty interests in Glasscock County, Texas.
• On October 28, Parsley entered into a new revolving credit agreement which replaces the Company's previously existing amended and restated credit agreement. The borrowing base under the new credit agreement increased 89% from the borrowing base under the previously existing credit agreement, to $900 million, with a Company-elected commitment amount of $600 million. As of the end of 3Q16, pro-forma for the closing of the aforementioned acquisition of assets in Glasscock County and the newly elected commitment amount, liquidity stands at $801 million, consisting of $201 million of cash on hand and $600 million of undrawn borrowing capacity on the revolving credit facility.

"Parsley Energy continues to set the pace for efficient production growth, having more than doubled our oil volumes over the past twelve months while substantially reducing development and operating costs over the same period," said Bryan Sheffield, Parsley's President and CEO. "We are proud of the way we have managed through the downcycle by opportunistically expanding our asset base and reducing our cost structure to the point that well-level returns today match returns at $85 oil two years ago. We remain well-positioned for future growth, with a strong balance sheet and a high-quality drilling inventory distributed across scalable operating areas in premier portions of the Midland and Southern Delaware Basins. In fact, in light of our favorable combination of highly productive wells and low costs, we have deployed a fifth horizontal rig and continue to contemplate additional rig activity as we look toward 2017. In the meantime, we are raising full-year 2016 production guidance even as we transition to larger pad projects and undertake additional density that could translate to a flattish production profile in the fourth quarter on the way to rapid and efficient growth in 2017. Future growth potential is also enhanced by the prospect of significant resource expansion, of which adding a second target zone in the Wolfcamp B interval is just one component."

Operational Highlights

During the third quarter, Parsley spud 19 and completed 18 gross operated horizontal wells with an average working interest of 97%.

Well results continue to improve across operating areas and target intervals, driven by the ongoing evolution of drilling and completion designs and processes. The Kathryn 43-42-4401H, for example, completed in Reagan County with a 10,164' stimulated lateral in the Wolfcamp B interval and with approximately 40% higher proppant loading than analogous wells[2], registered a peak 30-day IP of 1,562 Boe per day and has outpaced analogues by approximately 8% over the first three months of production.

The 24 Midland Basin Wolfcamp A and Wolfcamp B wells that achieved 30-day peak production periods since the Company's last quarterly update generated a strong average 30-day IP rate of 1,159 Boe per day with an average stimulated lateral length of 6,644' and an average oil cut of 73%.

Parsley's second well completed in the Lower Spraberry formation, the Dusek 45-4-2807H, registered an increasing production rate for nearly two months before settling into a shallow decline profile, generating a peak 30-day IP of 1,148 Boe per day. Drilled in Upton County with a 10,114' stimulated lateral, the well continues to produce more than 800 barrels of oil per day after three months on production.

Parsley posted strong results from the Company's first stacked lateral completions in the Wolfcamp A, Upper Wolfcamp B, and Lower Wolfcamp B intervals located in northeast Upton County in the middle of Parsley's primary development area. Completed simultaneously, the three wells are on average tracking ahead of the Company's 1 MMBoe EUR type curve for Wolfcamp A and Wolfcamp B wells in the Midland Basin after almost one month of production. Notably, the Grace 45-1-4306H, completed in the Upper Wolfcamp B interval, recently registered the second-highest 24-hour initial production rate in the Company's history at 2,420 Boe per day, representing 306 Boe per day per thousand stimulated feet.

In light of favorable results from wells completed in the upper and lower portions of the Wolfcamp B interval—on a standalone basis and when completed together—Parsley continues to progress toward higher expected recovery factors in the Company's prolific Midland Basin Wolfcamp complex. The 550 gross drilling locations added to the Company's horizontal drilling inventory by virtue of including a second target zone in the Wolfcamp B interval assumes eight wells per section in both the upper and lower portions of the Wolfcamp B. Ongoing density testing will evaluate the prospect of up to 15 wells per section in each of the Wolfcamp B target zones. In addition, with several hundred feet of Wolfcamp A thickness across the Company's acreage in Upton and Reagan Counties, Parsley plans to test a second target zone in the Wolfcamp A interval, as well.

Horizontal wells on Parsley's Southern Delaware acreage continue to register prolific production trends. The Company's two most recent wells on its Trees Ranch development area in Pecos County, the Trees State 65-36-4307H and the Trees State 65-64-4307H, posted peak 30-day IP rates of 1,569 and 1,465 Boe per day, respectively, or 197 and 192 Boe per day per thousand stimulated feet, respectively. The Company's first drilled (second completed) well on its Reeves County acreage, the Lincoln 4-1-4307H, has not yet achieved a peak 30-day rate but recently posted a robust peak 24-hour rate of 2,292 Boe per day or 333 Boe per day per thousand stimulated feet.

Financial Highlights

During the third quarter of 2016, the Company recorded a net loss attributable to its stockholders of $2.7 million, or $0.02 per weighted average share, compared to $21.4 million, or $0.13 per weighted average share during the second quarter of 2016. 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 the third quarter of 2016 was $6.7 million, or $0.03 per diluted share.³ 

Adjusted earnings before interest, income taxes, depreciation, depletion, amortization, and exploration expense ("Adjusted EBITDAX") for the third quarter of 2016 was $94.7 million, up 16% compared to the second quarter of 2016.[3]

LOE per Boe decreased from $4.37 in 2Q16 to $4.15 in 3Q16. The Company is lowering full-year 2016 LOE per Boe guidance from $4.50-$5.25 to $4.25-$4.75. G&A per Boe increased from $5.33 in 2Q16 to $6.24 in 3Q16, while cash G&A per Boe, which excludes stock-based compensation expense, increased from $4.28 in 2Q16 to $5.40 in 3Q16, reflecting incremental staffing in preparation for higher anticipated development activity in coming quarters. The Company is raising full-year 2016 cash G&A per Boe guidance from $4.50-$5.00 to $5.00-$5.50. Depreciation, depletion, and amortization expense per Boe decreased from $17.23 in 2Q16 to $16.62 in the third quarter of 2016.

Reported capital expenditures decreased by $44 million quarter-over-quarter to $92 million, driven by lower drilling and completion activity relative to 2Q16 and by declining well costs that have resulted in favorable actual costs relative to cost estimates made over recent periods. Reported capital expenditures include costs associated with the horizontal drilling activity noted above, as well as one vertical well and two saltwater disposal wells. Drilling and completion costs for a 7,000-stimulated-foot Wolfcamp well in the Midland Basin averaged $4.7 million during the third quarter, while analogous wells in the Southern Delaware basin cost $6.1 million on average during 3Q16. The Company maintains estimated full-year 2016 capital expenditures at a range of $460-$510 million despite the addition of a fifth horizontal rig in September.

Liquidity Update

As of September 30, 2016, pro forma for the elected commitment amount under the Company's revolving credit facility, the Company had $1.17 billion of liquidity—consisting of $572 million of cash on hand and an undrawn amount of $600 million on the Company's revolving credit facility. Pro forma, as well, for the closing of its Glasscock County acreage acquisition on October 4, 2016, the Company had approximately $201 million of cash on hand and $801 million of liquidity.

Hedging Update

Parsley maintains an active hedging program to reduce the variability of its anticipated cash flows arising from fluctuations in commodity prices. The Company has hedged the majority of anticipated oil volumes through the end of 2016 and maintains a significant hedge position into the first quarter of 2018, having added to its hedge position covering the second half of 2017 and the first quarter of 2018 since the last quarterly update. For details on Parsley's hedging position, please see the table below under Supplemental Information and/or the Company's Quarterly Report on Form 10-Q, upon availability, for the period ended September 30, 2016.

Full-year 2016 Guidance Update

Corporate Governance Update

As part of Parsley's ongoing commitment to responsible corporate governance and at the recommendation of the Company's Board of Directors, the Company intends to respond to recent trends in favor of majority voting for directors by enabling shareholders to determine Parsley's policy on this issue at the Company's next annual meeting.

Conference Call Information

Parsley Energy will host a conference call and webcast to discuss its results for the third quarter of 2016 on Thursday, November 3 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 November 11 by dialing 877-660-6853 (United States/Canada) or 201-612-7415 (International). Conference ID: 13647023. A live broadcast will also be available on the internet 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 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] Estimated present value is pre-tax and unhedged; NPV range based on productivity range of 800 MBoe to 1 MMBoe EUR for 7,000' stimulated lateral scaled proportionately to average stimulated lateral length of 6,400'; Further assumes—D&C cost: $4.4 million; Oil price: $50 per barrel; Natural gas price: $3 per Mmcf; NGL price: $20 per barrel; working interest: 82%; net revenue interest: 62%; LOE: $7,500 per month fixed, $2.00/barrel of oil variable; discount rate: 10%.
[2] Analogues consist of wells completed by the Company in the last two years within a 3-mile radius in the same target interval with an equivalent lateral length.
[3] "Adjusted EBITDAX" and "adjusted net income" are not presented in accordance with generally accepted accounting principles in the United States ("GAAP"). Please see the supplemental financial information at the end of this news release for a reconciliation of the non-GAAP financial measures of adjusted EBITDAX and adjusted net income to GAAP financial measures.

- 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 (loss) income before depreciation, depletion and amortization, exploration costs, acquisition costs, (gain) loss on sale of property, asset retirement obligation accretion expense, stock-based compensation, net interest expense, income tax (benefit) expense, rig termination costs, (gain) loss on derivatives, net settlements on derivative instruments, and net premium realizations on options that settled during the period.

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 measure of other companies. The Company believes that Adjusted EBITDAX is a widely followed measure of operating performance.

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

Adjusted Net Income

Adjusted net income is a 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, (gain) loss on sale of property, exploration costs, and acquisition costs 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 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 income (loss).

Supplemental Information

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