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Spotlight on Parsley Energy in 2Q15

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Parsley’s 2Q15 revenues

Parsley Energy (PE) released its 2Q15 financial results on August 11. We’ll discuss its latest quarterly result in this series. But first let’s look at a snapshot of Parsley’s 2Q15 revenues and earnings. The company recorded $77.86 million in net operating revenues in 2Q15, which is down 5.4% from the $82.30 million recorded in 2Q14. Parsley’s revenues for this latest quarter decreased mainly due to lower price realizations, which were partially offset by higher production.

Parsley’s 2Q15 revenues from crude oil sales increased, but its revenues from natural gas and NGL (natural gas liquids) decreased during 2Q14. We’ll discuss the details of these results later in the series.

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2Q15 earnings 

Parsley recorded a $19.13 million net loss in 2Q15, compared to its $38.64 million net loss in 2Q14. Its net loss margin improved to -24.6% in 2Q15, down from -47.0% one year earlier. A company’s net loss margin is its net loss attributable to shareholders, divided by total revenues for the quarter.

Compared to 2Q14, some of the Parsley’s key operating costs increased in 2Q15. The company’s lease operating expense, for example, increased steeply due to an increase in its well count and production. Higher production volume and an increase in capitalized costs also led to higher DD&A (depreciation, depletion, and amortization) expenses.

Other influential factors

In 2Q15, Parsley recorded a $17.7 million net loss related to mark-to-market commodity derivative contracts. By comparison, the company’s loss in 2Q14 amounted to $14.5 million. In 2Q15, it recorded $3.8 million rig termination charge, while net income was positively affected by a $10.2 million income tax benefit. In 2Q14, Parsley’s net earnings were reduced by a $50 million charge related to incentive unit compensation. These units were issued to Parsley’s legacy investors, management, and employees. In May 2014, Parsley’s predecessor company, Parsley Energy, LLC, was reorganized by exchanging its existing units for shares of Parsley’s common stock.

By comparison, Cimarex Energy (XEC) recorded a 33% decline in adjusted revenues between 2Q14 and 2Q15, and Laredo Petroleum (LPI) recorded a 29% decline in adjusted revenues between 2Q15 and 2Q14. Energen Corporation (EGN) recorded a 38.4% revenue decline during the same period. Parsley Energy makes up 1.5% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

In the next part of this series, we’ll discuss Parsley’s earnings versus estimates.

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