Parsley Energy Grows Drilling Inventory 73% with Permian Acquisition
Parsley Energy (NYSE: PE) announced in its Q1’17 earnings call that it had closed the acquisition of about 71,000 acres and associated assets in the Permian Basin from Double Eagle Energy Permian LLC. The acquisition — which spans Dawson, Andrews, Martin, Howard, Midland, Glasscock, Upton, and Reagan Counties — increases Parsley’s total leasehold in the Permian to about 230,000 net acres and grows its net drilling inventory (in terms of locations in priority target zones) by 73 percent:
Source: Parsley Energy Investor Presentation, June 2017
Footnote 3: “Priority target zones include Lower Spraberry, Wolfcamp A, Wolfcamp B, and Delaware Wolfcamp”
The Double Eagle acreage encompasses 23 DUCs and about 3,300 net horizontal drilling locations. Between now and the end of 2017, Parsley intends to drill about 30 wells on the acquired acreage in Midland, Martin, Howard, and Glasscock Counties:
Acreage Trades Increase Total Lateral Footage
Parsley also executed several acreage trades in the Permian to increase the value of the Double Eagle assets. On the earnings call, COO Bryan Sheffield noted that the trades “moved us out of some low working interest non-operated tracts into some premium operated blocks.”
The move delivered about 155 net horizontal drilling locations, with an average lateral length of about 7,000 feet, and extended about 70 net horizontal drilling locations by an average of about 4,000 feet. The total increase to the company’s horizontal drilling inventory is estimated at 900,000 net lateral feet.
Additional Q1 Highlights
New Wells in the Midland Basin
During Q1’17, Parsley spudded a total of 26 gross operated horizontal wells and completed 22, with an average completed lateral length of about 7,700 feet. Most D&C activity occurred in the Midland Basin, where the company spudded 20 gross operated horizontal wells and completed 19, with the rest being spudded and completed in the Southern Delaware Basin.
D&C Costs Increase
Parsley’s drilling and completion costs in the Midland Basin increased in Q1 by 12 percent to $758 per lateral foot, driven mostly by increased R&D spending and lower average lateral lengths.
Heightened Activity Drives Adjusted Production Guidance
Spurred by its recent acquisitions, Parsley plans to complete 25-35 gross operated horizontal wells in Q2, 35-45 in Q3, and 40-50 in Q4. This planned growth has prompted the company to raise its net production guidance (net MBoe/d) for both Q4’17 and FY2017:
Strong Start to a Year of Growth
Parsley made a huge move with the acquisition of the Double Eagle assets in Q1 and wasted no time making big plans for its new acreage — big enough to call for an adjustment of its production guidance. The projected increase in production has compelled the company to add to its oil hedge portfolio, with the goal of stabilizing future cash flows: Total MBbls/d hedged, estimated at 12.9 for Q2’17, are expected to increase to 60.3 by Q4’18.
With the end of Q2 just a few days away, we’ll soon have the opportunity to see if the company is keeping pace with its ambitious objectives.
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