Parsley Energy announces consolidating Midland Basin acquisition
Wednesday, Feb 08, 2017
Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today announced that it has entered into an agreement to acquire certain undeveloped acreage and producing oil and gas properties in the core of the Midland Basin from Double Eagle Energy Permian, LLC ("Double Eagle") for an aggregate purchase price of approximately $2.8 billion, subject to purchase price adjustments and customary closing conditions. Upon completion, the pending acquisition will add approximately 71,000 net acres to the Company's Midland Basin acreage portfolio, bringing total Permian Basin net acreage to approximately 227,000 acres. Parsley intends to increase drilling and completion activity on the Company's expanded asset base and, as a result, is updating 2017 capital plans and operating guidance to reflect increased capital investment and associated production growth. Herein Parsley also provides updates on preliminary 4Q16 and full-year 2016 operational results, year-end 2016 reserves, and recent hedging activity.

Acquisition Highlights

  • Approximately 71,000 net leasehold acres
  • Estimated net production of approximately 3,600 Boe per day as of January 1, 2017
  • 23 drilled uncompleted wells, variously targeting the Lower Spraberry, Middle Spraberry, Wolfcamp A, and Wolfcamp B formations, with an average lateral length of approximately 8,400 feet, valued at approximately $75-100 MM in aggregate
  • Approximately 3,300 net horizontal drilling locations, including approximately 1,800 net locations in high priority target intervals (Lower Spraberry, Wolfcamp A, Wolfcamp B)
  • Average lateral length of approximately 6,600 feet on acquired horizontal drilling locations; more than 40% of acquired horizontal drilling locations have lateral lengths of 7,500 feet or more
  • Operating control on 80% of net horizontal drilling locations
  • Incremental value potential through ongoing acreage trades, bolt-on acquisitions, and working interest buyouts; Double Eagle to assist with asset operation and handoff, as well as acreage trades and purchases after closing
  • Consideration consists of approximately $1.4 billion of cash and approximately 39.4 million units of Parsley Energy, LLC (together with a corresponding number of shares of Parsley Energy class B common stock) valued at approximately $1.4 billion; Parsley intends to finance the cash portion of the consideration through equity and debt offerings announced concurrently with the acquisition
  • Scheduled to close on or before April 20, 2017, subject to the satisfaction of customary closing conditions
Pro Forma Company Highlights

  • Approximately 227,000 net leasehold acres in the Permian Basin
  • Approximately 179,000 net leasehold acres in the Midland Basin, representing the second-largest Midland Basin net acreage position among publicly traded E&P companies
  • Approximately 7,900 net horizontal drilling locations, including approximately 4,300 net locations in well delineated, high value target intervals (Wolfcamp A, Wolfcamp B, and Lower Spraberry in the Midland Basin; Upper Wolfcamp in the Southern Delaware Basin)
  • Sufficient acreage footprint to support more than 20 rigs focused on horizontal development
"We are pleased to solidify Parsley's position as a leading Permian operator through our largest acquisition to date," stated Bryan Sheffield, Chairman and Chief Executive Officer of Parsley Energy. "This transaction maintains our focus on core of the core acreage with the most favorable reservoir characteristics and positions us for years of production growth at the low end of the cost curve. The infusion of high quality drilling locations substantially increases our peak production potential and extends our inventory of drilling locations while enhancing the quality of that inventory. We believe this transaction sets us apart from peer companies on the basis of the size and quality of our acreage position in what we consider the most desirable basin in the country."

John Sellers and Cody Campbell, Co-CEOs of Double Eagle, commented, "With many possible paths for the next phase in the evolution and development of Double Eagle's assets, we were excited to negotiate a transaction with Parsley given the Company's history of efficient growth and of enhancing the value of its asset base through the same types of creative transactions it took to build Double Eagle's portfolio." Greg Beard, Head of Natural Resources and Senior Partner at Apollo Global Management, added, "On behalf of Apollo and Double Eagle's other financial sponsors, Post Oak Energy Capital and Magnetar Capital, we look forward to working with Parsley Energy as the Company develops the prized assets the Double Eagle team has expertly assembled in the true core of the Midland Basin. We believe Parsley's record of strong operational performance and the Company's complementary asset base make Parsley the ideal company to deliver the tremendous value associated with these assets."

Fourth Quarter and Full Year 2016 Operations Update1

The Company expects to report 4Q16 net production of 44.8-45.2 MBoe per day, up approximately 5% at the midpoint versus 3Q16 net production, placing full-year 2016 average production within the annual guidance range.

The Company expects to report 4Q16 capital expenditures of $155-$160 MM, translating to full-year 2016 capital expenditures that fall within the annual guidance range. Parsley expects to report unit costs near the low end of annual guidance ranges.

Updated 2017 Capital Program and Operational Guidance2

Prompted by the pending acreage acquisition and relative to the activity contemplated by its previously disclosed capital program, Parsley intends to add four rigs by the end of 2017, translating to approximately 40 incremental horizontal well spuds in 2017, approximately 10 of which are expected to be put on production this year. All of the incremental wells would be located in the Midland Basin. While the majority of the production impact associated with incremental drilling and completion activity would occur in 2018, Parsley is raising 2017 net daily production guidance by 5 MBoe per day to a range of 62-68 MBoe per day, and is likewise increasing expected 4Q17 production from 70-80 MBoe per day to 75-85 MBoe per day.

Hedging Update

In view of the anticipated production growth associated with additional drilling and completion activity on an expanded asset base, Parsley has added meaningfully to and extended the duration of its oil hedge portfolio, thereby reducing the variability of its anticipated cash flows and enhancing the Company's ability to execute its development and value creation objectives.

Year-end 2016 Reserves

Parsley posted strong reserve growth in 2016. The Company's proved reserves as of December 31, 2016 were 222.3 MMBoe and consist of 136.5 million barrels of oil, 223.6 billion cubic feet of natural gas, and 48.5 million barrels of natural gas liquids.

Proved Reserve Highlights

  • Proved reserves increased 80% to 222.3 MMBoe, while proved developed reserves increased 106% to 106.1 MMBoe from year-end 2015 reserves
  • Total reserves increased by 98.5 MMBoe as compared to 2016 production volumes of 14.0 MMBoe
  • Proved developed reserves at year-end 2016 represent 48% of total proved reserves
  • The Company voluntarily removed all of the remaining 18.4 MMBoe of economic reserves associated with potential vertical well activity over the next five years
  • Pricing revisions account for 2.8 MMBoe of 3.8 MMBoe total revisions to proved reserve estimates
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.

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