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Parsley Inks Permian Acquisition Deal, Updates Guidance


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U.S.-based upstream company, Parsley Energy Inc PE recently entered into an agreement with Double Eagle Energy Permian, LLC to acquire certain assets in the oil-rich Permian basin for $2.8 billion. Half of the consideration amount will be paid in cash financed through equity and debt offerings.

The other half will consist of 39.4 million units of Parsley's stock, valued at $1.4 billion. Post the announcement of the deal, the company's shares dropped nearly 4% in after-market trading.

Upon the execution of the deal, the acquisition will add about 71,000 net acres in the Midland Basin bringing the total Permian Basin net acreage portfolio to 227,000 acres. The deal is expected to close by Apr 20 subject to purchase price adjustments and customary closing conditions.

Most of the energy companies are boosting their acquisition activities in the Permian region due to the region's extensive pipeline network, ample labor supplies and favorable climate. Last month, Noble Energy NBL acquired small rival, Clayton Williams Energy CWEI to boost its presence in the Permian Basin . Also, Exxon Mobil XOM paid $6.6 billion to expand its Permian assets . Last year, the energy industry overall spent more than $28 billion into this top U.S. oil field acreage acquisition.

This is Parsley's second Permian deal in less than a month after it announced the acquisition of Permian acreage on Jan 10, for $607 million. The company plans to enhance its drilling and completion activity on its expanded asset base and therefore has revised its capex and operating guidance.

Capex Guideline

Parsley Energy also announced that its capital budget for 2017 will be hiked to $1-$1.15 billion from $750-$900 million. The increased capital budget is attributed to the construction of additional horizontal wells, deployment of vertical rig, service and equipments cost inflation and costs associated with integration of new assets.

Production Guideline

Parsley has increased its production target for 2017 by 5,000 barrels per day to 62,000-68,000 barrels per day. The company plans to produce oil and gas properties in the core of Midland Basin. It also intends to bore 40 incremental horizontal wells, 10 of which are likely to be put to production this year. 

2016 update

The company plans to release its fourth quarter and year end results on Feb 23 and expects to report net production of 44.8-45.2 thousand barrels of oil equivalent per day and capital expenditure of $155-$160 million for the fourth quarter. The proved reserves of the company as of Dec 31 amount to 222.3 million barrels of oil equivalent.

Zacks Rank

Parsley Energy Inc, headquartered in Texas, deals with the acquisition, production and exploration of oil and natural gas. The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.

Over the last one year, the Zacks categorized U.S Oil and Gas Production & Exploration  industry has registered 64% growth. However, units of Parsley Energy have outperformed the industry by registering a growth rate of 100%.

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Exxon Mobil Corporation (XOM): Free Stock Analysis Report

Noble Energy Inc. (NBL): Free Stock Analysis Report

Clayton Williams Energy, Inc. (CWEI): Free Stock Analysis Report

Parsley Energy, Inc. (PE): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: XOM , NBL , PE



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